IZA DP No. 4827: Guilt from Promise-Breaking and Trust in Markets for Expert Services: Theory and Experiment
significantly revised version published as 'Shaping Beliefs in Experimental Markets for Expert Services: Guilt Aversion and the Impact of Promises and Money-Burning Options' in: Games and Economic Behavior, 2013, 81, 145-164
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.