Payment scheme self-selection in the credence goods market: An experimental study

Hernán Bejarano, Ellen Green, Stephen Rassenti

    Research output: Contribution to journalArticle

    2 Scopus citations

    Abstract

    Given heterogeneity in expert behavior across payment schemes in credence goods markets, it is important to understand the consequences of payment scheme selection on market outcomes. To study the effect that expert payment selection has on customer well-being, we recruited subjects to participate in a real-effort credence goods laboratory game. Experts were either randomly assigned or faced with the choice of three payment schemes: fee-for-service, salary, and capitation. We found that when experts selected fee-for-service payment customers experience significantly worse outcomes than when experts were randomly assigned to fee-for-service. In contrast, whether experts selected or were randomly assigned to salary payment, customer outcomes did not change.

    Original languageEnglish (US)
    Pages (from-to)396-403
    Number of pages8
    JournalJournal of Economic Behavior and Organization
    Volume142
    DOIs
    StatePublished - Oct 2017

    Keywords

    • Capitation
    • Credence goods
    • Fee-for-service
    • Payment
    • Self-selection
    • Sorting

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Organizational Behavior and Human Resource Management

    Fingerprint Dive into the research topics of 'Payment scheme self-selection in the credence goods market: An experimental study'. Together they form a unique fingerprint.

  • Cite this