Competition Fosters Trust
Research output: Working paper › Research
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- 0622
Final published version, 374 KB, PDF document
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
Original language | English |
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Place of Publication | Cph. |
Publisher | Department of Economics, University of Copenhagen |
Number of pages | 21 |
Publication status | Published - 2006 |
- Faculty of Social Sciences - experience goods, competition, trust, moral hazard, reputation
Research areas
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ID: 312744