What Drives Fraud in a Credence Goods Market? – Evidence from a Field Study |
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| Authors: | Alexander Rasch Christian Waibel |
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| Institution: | 1. Duesseldorf Institute for Competition Economics (DICE), University of Duesseldorf, Duesseldorf, Germany;2. Centre for European Economic Research, Germany;3. ETH Zurich, Zurich, Switzerland |
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| Abstract: | This paper investigates the impact of competition on an expert firm's incentive to defraud its customers in a credence goods market. Controlling for the competence of car repair shops, their financial situation, and reputational concerns, we use and complement the data set from a nationwide field study conducted by the German Automobile Association that regularly checks the reliability of garages in Germany. We find that more intense competition lowers a firm's incentive to defraud its customers. |
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