Taxi rides on business trips are more expensive than on private trips
Who has never experienced this situation: Arriving in another city, you are completely dependent on taxi drivers, who know their way around, to take you where you want to go. However, sometimes you may suspect that you are paying a higher taxi fare than locals. This suspicion is founded, as Matthias Sutter from the chair 'Economics: Design and Behavior' at the University of Cologne, has found out. Taxi drivers calculate a higher fare if they know that their passenger is from out of town and, in particular if the passenger indicates that he or she will be reimbursed for the costs. In these cases, the taxi fare rises by an average of 7 percent. In his current study on moral hazard, Sutter cooperated with his colleagues Loukas Balafoutas and Rudolf Kerschbamer from the University of Innsbruck. The results of their study 'Second-Degree Moral Hazard in a Real-World Credence Goods Market'...