The Value of Rating Systems in Credence Goods Markets

Abstract In this paper, we experimentally investigate the effect of public consumer ratings on market outcomes in credence goods markets. Contrary to search or experience goods, consumers cannot evaluate all dimensions of trade for credence goods, which may inhibit the information and reputation-building value of public rating systems. We implement a market in which experts have an informational advantage over consumers with respect to the appropriate service level. The rating system takes the f