Payment Scheme Self-Selection in the Credence Goods Market: An Experimental Study Payment Scheme Self-Selection in the Credence Goods Market: An Experimental Study Payment Scheme Self-Selection in the Credence Goods Market: An Experimental Study

Hernan Cide, Ellen Green, Stephen Rassenti
unpublished
Given heterogeneity in expert behavior across payment schemes in credence goods markets, it becomes important to understand the consequences of payment scheme selection. To study the effect on customer well being of expert self-selection, we recruited subjects to participate in a real-effort credence good laboratory market. Experts were either randomly assigned or faced with the choice of three payment schemes: fee-for-service, salary, and capitation. We found that experts who selected
more » ... ervice payment resulted in customers with significantly worse outcomes in comparison with experts who had been randomly assigned to fee-for-service. In contrast, experts who selected salary payment did not change customer outcomes relative to those who were randomly assigned. Highlights: • Selection of fee-for-service and salary dominated over capitation. • Self-selected Fee-for-service provided significantly more edits than randomly assigned. • Self-selected Salary did not change the number of edits relative to randomly assigned.
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