Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 436: Guilt from Promise-Breaking and Trust in Markets for Expert Services – Theory and Experiment
Adrian Beck, Rudolf Kerschbamer, Jianying Qiu and Matthias Sutter ()
Additional contact information
Adrian Beck: Department of Economics, University of Innsbruck
Rudolf Kerschbamer: Department of Economics, University of Innsbruck
Jianying Qiu: Department of Economics, University of Innsbruck
Matthias Sutter: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: and, Department of Public Finance, University of Innsbruck
Abstract: We examine the influence of guilt and trust on the performance of credence goods markets. An expert can make a promise to a consumer first, whereupon the consumer can express her trust by paying an interaction price before the expert's provision and charging decisions. We argue that the expert's promise induces a commitment that triggers guilt if the promise is broken, and guilt is exacerbated by higher interaction prices. An experiment qualitatively confirms our predictions: (1) most experts make the predicted promise; (2) proper promises induce consumer-friendly behavior; and (3) higher interaction prices increase the commitment value of proper promises.
Keywords: Promises; Guilt; Trust; Credence Goods; Experts; Reciprocity
49 pages, March 17, 2010
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