A Theory of Fraud and Overtreatment in Experts Markets
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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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 15 (2006)
Issue (Month): 4 (December)
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582, University of Gothenburg, Department of Economics, revised Apr 2014.
- Uwe Dulleck & Rudolf Kerschbamer & Alexander Konovalov, 2014. "Too much or too little? Price-discrimination in a market for credence goods," Working Papers 2014-13, Faculty of Economics and Statistics, University of Innsbruck.
- Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, University of Innsbruck.
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