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On Doctors, Mechanics, and Computer Specialists: The Economics of Credence Goods

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Author Info
Uwe Dulleck
Rudolf Kerschbamer

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Abstract

Most of us need the services of an expert when our apartment's heating or our washing machine breaks down, or when our car starts to make strange noises. And for most of us, commissioning an expert to solve the problem causes concern. This concern does not disappear even after repair and payment of the bill. On the contrary, one worries about paying for a service that was not provided or receiving some unnecessary treatment. This article studies the economics underlying these worries. Under which conditions do experts have an incentive to exploit the informational problems associated with markets for diagnosis and treatment? What types of fraud exist? What are the methods and institutions for dealing with these informational problems? Under which conditions does the market provide incentives to deter fraudulent behavior? And what happens if all or some of those conditions are violated?

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 44 (2006)
Issue (Month): 1 (March)
Pages: 5-42
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Handle: RePEc:aea:jeclit:v:44:y:2006:i:1:p:5-42

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  1. Christiane Schwieren & Matthias Sutter, 2007. "Trust in cooperation or ability? An experimental study on gender differences," Working Papers 2007-20, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
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  2. Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University. [Downloadable!]
  3. Kyle Hyndman & Saltuk Ozerturk, 2008. "Consumer Information in a Market for Expert Services," Departmental Working Papers 0801, Southern Methodist University, Department of Economics. [Downloadable!]
  4. Alex Gershkov & Motty Perry, 2009. "Contracts for Providers of Medical Treatments," Discussion Paper Series dp516, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem. [Downloadable!]
  5. Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University. [Downloadable!]
  6. Lindqvist, Erik, 2008. "Will Privatization Reduce Costs?," Working Paper Series 736, Research Institute of Industrial Economics. [Downloadable!]
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  7. Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University. [Downloadable!]
  8. Uwe Dulleck & Rudolf Kerschbamer, 2007. "Experts vs. Discounters: Consumer Free Riding and Experts Withholding Advice in Markets for Credence Goods," Working Papers 2007-21, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
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  9. Laurent Linnemer, 2008. "Dissipative Advertising Signals Quality even without Repeat Purchases," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  10. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," Working Papers 2009-03, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
    Other versions:
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