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How Social Preferences Shape Incentives in (Experimental) Markets for Credence Goods.

ABSTRACT: Credence goods markets suffer from inefficiencies caused by superior information of sellers about the surplus-maximising quality. While standard theory predicts that equal mark-up prices solve the credence goods problem if customers can verify the quality received, experimental evidence indicates the opposite. We identify a lack of robustness with respect to heterogeneity in social preferences as a possible cause of this and conduct new experiments that allow for parsimonious identification of sellers' social preference types. Our results confirm the assumed heterogeneity in social preferences and provide strong support for our explanation of the failure of verifiability to increase efficiency.

SUBMITTER: Kerschbamer R

PROVIDER: S-EPMC5347901 | biostudies-literature | 2017 Mar

REPOSITORIES: biostudies-literature

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How Social Preferences Shape Incentives in (Experimental) Markets for Credence Goods.

Kerschbamer Rudolf R Sutter Matthias M Dulleck Uwe U

Economic journal (London, England) 20160223 600

Credence goods markets suffer from inefficiencies caused by superior information of sellers about the surplus-maximising quality. While standard theory predicts that equal mark-up prices solve the credence goods problem if customers can verify the quality received, experimental evidence indicates the opposite. We identify a lack of robustness with respect to heterogeneity in social preferences as a possible cause of this and conduct new experiments that allow for parsimonious identification of s ...[more]

PMID: 28344358

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Project description:Significance Physicians routinely face trade-offs among their own interests, the interests of their patients, and society’s interest in preserving medical resources. To manage these trade-offs, society relies on both traditional professional ethics and bureaucratic monitoring and control. Our results—that physicians are twice as likely to be altruistic as all other samples but indistinguishable from the general population in terms of equality–efficiency orientation—suggest that professional norms can meaningfully contribute to physicians putting patients first and highlight the importance of nurturing these norms of physician professionalism. However, our findings also suggest that policymakers may not rely on physician professionalism to ensure an efficient allocation of medical resources. Physicians’ professional ethics require that they put patients’ interests ahead of their own and that they should allocate limited medical resources efficiently. Understanding physicians’ extent of adherence to these principles requires understanding the social preferences that lie behind them. These social preferences may be divided into two qualitatively different trade-offs: the trade-off between self and other (altruism) and the trade-off between reducing differences in payoffs (equality) and increasing total payoffs (efficiency). We experimentally measure social preferences among a nationwide sample of practicing physicians in the United States. Our design allows us to distinguish empirically between altruism and equality–efficiency orientation and to accurately measure both trade-offs at the level of the individual subject. We further compare the experimentally measured social preferences of physicians with those of a representative sample of Americans, an “elite” subsample of Americans, and a nationwide sample of medical students. We find that physicians’ altruism stands out. Although most physicians place a greater weight on self than on other, the share of physicians who place a greater weight on other than on self is twice as large as for all other samples—32% as compared with 15 to 17%. Subjects in the general population are the closest to physicians in terms of altruism. The higher altruism among physicians compared with the other samples cannot be explained by income or age differences. By contrast, physicians’ preferences regarding equality–efficiency orientation are not meaningfully different from those of the general sample and elite subsample and are less efficiency oriented than medical students.

Dataset Information

How Social Preferences Shape Incentives in (Experimental) Markets for Credence Goods.

Publications

How Social Preferences Shape Incentives in (Experimental) Markets for Credence Goods.

Similar Datasets

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