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A Theory of Fraud and Overtreatment in Experts Markets

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Author Info
Ingela Alger
François Salanié

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Abstract

"Consumers often rely on an expert's diagnosis to assess their needs. If the expert is also the seller of services, he may use his informational advantage to induce overtreatment, which is a pervasive phenomenon in experts markets. We offer and discuss conditions leading to equilibrium overtreatment in an otherwise purely competitive model. This market failure results from consumers' ability to turn down an expert's recommendation: experts defraud consumers to keep them uninformed, as this deters them from seeking a better price elsewhere." Copyright 2006, The Author(s) Journal Compilation (c) 2006 Blackwell Publishing.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 15 (2006)
Issue (Month): 4 (December)
Pages: 853-881
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Handle: RePEc:bla:jemstr:v:15:y:2006:i:4:p:853-881

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  1. Liu, Ting, 2006. "Credence Goods Markets with Conscientious and Selfish Experts," MPRA Paper 1107, University Library of Munich, Germany, revised 10 Sep 0007. [Downloadable!]
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This page was last updated on 2009-11-22.

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