- The Washington Times - Tuesday, February 28, 2017

Taxi drivers who know their passengers will be reimbursed by their bosses for cab fare are likely to overcharge compared to travelers who are footing their own bill, according to a new study.

The data were collected by a University of Innsbruck researchers who took some 400 taxi rides over 11 different routes in Athens, The Economist reported Tuesday.

In half the cases, the researchers indicated that their employers would be reimbursing their fare, The Economist reported. Those researchers were 17 percent likelier to be overcharged for their trip, paying an average of 7 percent more per fare.

“Our results suggest that second‐degree moral hazard may have a severe impact on the provision of credence goods,” noted in the abstract to the study, “Second-Degree Moral Hazard in a Real-World Credence Goods Market,” published in the February edition of The Economic Journal.

The research was funded by grants from the Austrian Science Fund and the Australian Research Council, according to information available at the Wiley Online Library.


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