Competition Fosters Trust
Publikation: Working paper › Forskning
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Competition Fosters Trust. / Huck, Steffen; Ruchala, Gabriele K.; Tyran, Jean-Robert.
Cph. : Department of Economics, University of Copenhagen, 2006.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Competition Fosters Trust
AU - Huck, Steffen
AU - Ruchala, Gabriele K.
AU - Tyran, Jean-Robert
N1 - JEL Classification: C72, C92, D40, L14
PY - 2006
Y1 - 2006
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 - Faculty of Social Sciences
KW - experience goods
KW - competition
KW - trust
KW - moral hazard
KW - reputation
M3 - Working paper
BT - Competition Fosters Trust
PB - Department of Economics, University of Copenhagen
CY - Cph.
ER -
ID: 312744