Guilt from Promise-Breaking and Trust in Markets for Expert Services: Theory and Experiment

50 Pages Posted: 22 Mar 2010

See all articles by Adrian Beck

Adrian Beck

University of Innsbruck

Rudolf Kerschbamer

University of Innsbruck; Centre for Economic Policy Research (CEPR)

Jianying Qiu

affiliation not provided to SSRN

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

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

JEL Classification: C72, C91, D82

Suggested Citation

Beck, Adrian and Kerschbamer, Rudolf and Qiu, Jianying and Sutter, Matthias, Guilt from Promise-Breaking and Trust in Markets for Expert Services: Theory and Experiment. IZA Discussion Paper No. 4827. Available at SSRN: https://ssrn.com/abstract=1575860

Adrian Beck (Contact Author)

University of Innsbruck ( email )

Universit├Ątsstra├če 15
Innsbruck, Innsbruck 6020
Austria

Rudolf Kerschbamer

University of Innsbruck ( email )

Universitaetsstrasse 15
Innsbruck, A - 6020
Austria
+43 512 507 7400 (Phone)
+43 512 507 2980 (Fax)

HOME PAGE: http://www.uibk.ac.at/c/c4/c409/staff/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jianying Qiu

affiliation not provided to SSRN ( email )

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

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