Competition Fosters Trust
Publikation: Working paper › Forskning
Standard
Competition Fosters Trust. / Huck, Steffen; Lünser, Gabriele K.; Tyran, Jean-Robert.
2006.Publikation: Working paper › Forskning
Harvard
APA
Vancouver
Author
Bibtex
}
RIS
TY - UNPB
T1 - Competition Fosters Trust
AU - Huck, Steffen
AU - Lünser, Gabriele K.
AU - Tyran, Jean-Robert
PY - 2006/11/24
Y1 - 2006/11/24
N2 - We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting buyers access to all sellers' complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely.
AB - We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting buyers access to all sellers' complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely.
KW - Experience Goods
KW - Competition
KW - Reputation
KW - Trust
KW - Moral hazard
KW - Information conditions
U2 - 10.2139/ssrn.946887
DO - 10.2139/ssrn.946887
M3 - Working paper
BT - Competition Fosters Trust
ER -
ID: 241647312