Uncertainty and Reputation Effects in Credence Goods Markets

We introduce two sources of uncertainty into credence-goods experiments: 1) diagnostic uncertainty; experts receive a noisy signal of buyer type; 2) service uncertainty; the services do not always work. Both make detection of dishonesty more difficult. In contrast to hypotheses, we find that uncertainty decreases dishonesty and increases trust; additionally, ratings do not improve efficiency of the transactions under uncertainty. Buyers tended to \u27shoot the messenger\u27 (give low ratings) when the high-need option does not work due to bad luck, and to give experts the \u27benefit of the doubt\u27 (high ratings) when the high-need option may have been intentionally overprovided