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Definition

1. Expert Services – Credence Goods. Definition an expert seller knows more about the quality a consumer needs than the consumer herself Examples repair services (cars, computers) medical treatments Problem: the expert can cheat overtreatment - providing a unnecessarily high quality

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  1. 1 Expert Services – Credence Goods • Definition • an expert seller knows more about the quality a consumer needs than the consumer herself • Examples • repair services (cars, computers) • medical treatments • Problem: • the expert can cheat • overtreatment - providing a unnecessarily high quality • undertreatment - providing a too low quality • overcharging - charging unjustifiably much

  2. 2 Expert Services – Literature • Theory • Darby and Karni (1973) • Dulleck and Kerschbamer (2006) • Experiments in the lab • Dulleck, Kerschbamer, and Sutter (2010) • Field data • Hughes and Yule (1992), Gruber and Owings (1996), Gruber et al. (1999), Izuka (2007):medicine • Schneider (2009):car repairs • Problems with data collection, control • Our solution: Natural field experiment in the taxi market

  3. 3 Taxi services • Literature on labor supply of taxi drivers (Camerer et al., 1997; Farber, 2005; Farber, 2008, Crawford and Meng, 2011), and on stopping behavior of taxi drivers (Gambetta and Hamill, 2005) • however, little is known about the actual product taxi drivers sell – an expert service! • Possible types of fraud • overtreatment = taking longer route • overcharging = charging more than justified by chosen route (e.g. night tariff, fictional fares etc.) • undertreatment ruled out

  4. 4 Research Question – Hypotheses • H1: Information about city • passengers who are not familiar with the city are more likely to face overtreatment • H2: Information about fares • passengers who are not familiar with the fares are more likely to face overcharging • H3: Income • high-income passengers receive worse service than low-income passengers

  5. 5 local native non-local native foreigner low income 29 29 29 high income 29 29 29 Treatments • Treatment design: 3x2 • 174 taxi rides in Athens, Greece

  6. 6 Method • The experiment • three experimenters (all male in their mid-late twenties) • manipulation of origin • simultaneous observations: same starting point, same destination, different roles • create reference point with local native • randomization over routes, days, and time

  7. 7 Method – Signaling Income • High income • wearing suit • top-end hotel • Low income • shabby clothes • low-end accommodation

  8. 8 Method – GPS Logger • keeping track of fraud • GPS-logger • records exact position every single second • allows reconstructing exact route, duration etc.

  9. 9 Method • Facts • 15 routes • 63 h net driving time • 2,236 km net travelled distance (≈ Innsbruck to Damascus) • 13 km mean trip distance • 22 min mean trip lenght • 3% female drivers • 42% Skoda, 30% Toyota

  10. 10 Method – Routes

  11. 11 Example for Overtreatment

  12. 12 Example for Overtreatment OT-index: 1.43 additional distance: 4.2km

  13. 13 Example for Overcharging non-local foreigner local price-index: 1.61 additional fare: €9.5

  14. 14 locals non-locals foreigners price-index 1.04 1.09 1.19 +4.4% +9.3% / +14.2% Results – Origin of Customer

  15. 15 locals non-locals foreigners OT-index 1.03 1.08 1.08 +5.4% +-0 / +5.4% Results – Origin of Customer

  16. 16 locals non-locals foreigners OC frequency 0.02 0.03 0.17 +50% +567% / +850% Results – Origin of Customer

  17. 17 price-index locals non-locals foreigners total low income 1.01 1.07 1.19 1.09 high income 1.07 1.11 1.18 1.12 Results – Income of Customer

  18. 18 OT-index locals non-locals foreigners total low income 1.01 1.06 1.06 1.05 high income 1.05 1.10 1.11 1.09 Results – Income of Customer

  19. 19 OC frequency locals non-locals foreigners total low income 0.00 0.00 0.21 0.07 high income 0.03 0.07 0.14 0.08 Results – Income of Customer

  20. 20 (1) Price Index (2) Overtreatment Index (3) Overcharging Dummy nonlocal 0.101** (0.051) 0.093*** (0.035) 0.018 (0.027) foreign 0.147*** (0.054) 0.005 (0.024) 0.094 *** (0.045) rich 0.046 (0.045) 0.060** (0.026) 0.018 (0.045) timezone -0.000 (0.003) -0.004** (0.002) 0.006 ** (0.003) Additional controls Yes Yes Yes Results – Econometric Analysis

  21. 21 Conclusion • Overtreatment: more extensive for passengers who are not from the city (H1) • Overcharging: more common for foreigners (H2) • Income: Partial effects only (overtreatment) • (Some) taxi drivers know whom to cheat and how to cheat!

  22. 22 Thank you!

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