TY  - RPRT
        AU  - Balafoutas, Loukas
AU  - Kerschbamer, Rudolf
AU  - Sutter, Matthias
        TI  - Second-Degree Moral Hazard in a Real-World Credence Goods Market
        PY  - 2013/Nov/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 7714
        UR  - https://www.iza.org/publications/dp7714
        AB  - Empirical literature on moral hazard focuses exclusively on the direct impact of asymmetric information on market outcomes, thus ignoring possible repercussions. We present a field experiment in which we consider a phenomenon that we call second-degree moral hazard – the tendency of the supply side in a market to react to anticipated moral hazard on the demand side by increasing the extent or the price of the service. In the market for taxi rides, our moral hazard manipulation consists of some passengers explicitly stating that their expenses will be reimbursed by their employer. This has an economically important and statistically significant positive effect on the likelihood of overcharging, with passengers in that treatment being about 13% more likely to pay higher-than-justified prices for a given ride. This indicates that second-degree moral hazard may have a substantial impact on service provision in a credence goods market.
        KW  - asymmetric information
KW  - moral hazard
KW  - credence goods
KW  - natural field experiment
KW  - overtreatment
KW  - overcharging
KW  - taxi
        ER  -