Crying behavior in credence good markets
Presenter
Doctoral Candidate at the School of Information
Abstract
In some credence good markets, when consumers are dissatisfied with the outcome of the seller’s treatment, they will sometimes choose behaviors that greatly raise the seller’s cost of ignoring them in the hope of receiving a consumer-desired outcome. These behaviors, which I call “crying behaviors”, will force a seller to choose an overtreatment, even if the seller does not have the incentive to overtreat when crying behaviors are not in consumers’ strategy set. Buyers’ crying and sellers’ overtreatment will lead to a Pareto-inefficient market outcome. In this study, I first establish a game theoretical model to demonstrate that the buyer choosing crying and the seller choosing overtreatment is the only Nash Equilibrium and a Pareto-inefficient outcome (with some assumptions) and propose some solutions. Then I propose to conduct a laboratory experiment to test whether this inefficient Nash Equilibrium is reached and whether the proposed solutions can significantly reduce the seller’s willingness to overtreat and the buyer’s willingness to cry.