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On the value of second opinions: A credence goods field experiment

Author

Listed:
  • Bindra, Parampreet Christopher
  • Kerschbamer, Rudolf
  • Neururer, Daniel
  • Sutter, Matthias

Abstract

Credence goods markets with their asymmetric information between buyers and sellers are prone to large inefficiencies. In theory, poorly informed consumers can protect themselves from maltreatment through sellers by gathering second opinions from other sellers. Yet, field experimental evidence whether this is a successful strategy is scarce. Here we present a natural field experiment in the market for computer repairs and show that revealing a second opinion from another expert does neither increase the rate of successful repairs nor decrease the average repair price charged by sellers.

Suggested Citation

  • Bindra, Parampreet Christopher & Kerschbamer, Rudolf & Neururer, Daniel & Sutter, Matthias, 2021. "On the value of second opinions: A credence goods field experiment," Economics Letters, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521002020
    DOI: 10.1016/j.econlet.2021.109925
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    References listed on IDEAS

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    2. Rudolf Kerschbamer & Daniel Neururer & Matthias Sutter, 2019. "Credence goods markets and the informational value of new media: A natural field experiment," Working Papers 2019-02, Faculty of Economics and Statistics, Universität Innsbruck.
    3. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2013. "What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(3), pages 876-891.
    4. Wolfgang Pesendorfer & Asher Wolinsky, 2003. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 417-437.
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    6. Mimra, Wanda & Rasch, Alexander & Waibel, Christian, 2016. "Second opinions in markets for expert services: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 106-125.
    7. Agarwal, Ritu & Liu, Che-Wei & Prasad, Kislaya, 2019. "Personal research, second opinions, and the diagnostic effort of experts," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 44-61.
    8. Felix Gottschalk & Wanda Mimra & Christian Waibel, 2020. "Health Services as Credence Goods: a Field Experiment," Post-Print hal-03137768, HAL.
    9. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    10. Kai Sülzle & Achim Wambach, 2005. "Insurance in a Market for Credence Goods," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(1), pages 159-176, March.
    11. Schneider, Tim & Bizer, Kilian, 2017. "Effects of qualification in expert markets with price competition and endogenous verifiability," University of Göttingen Working Papers in Economics 317, University of Goettingen, Department of Economics.
    12. Felix Gottschalk & Wanda Mimra & Christian Waibe, 2020. "Health Services as Credence Goods: a Field Experiment," The Economic Journal, Royal Economic Society, vol. 130(629), pages 1346-1383.
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    Cited by:

    1. Gerlach, Heiko & Li, Junqian, 2022. "Experts, trust and competition," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 552-578.

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    More about this item

    Keywords

    Credence goods; Expert services; Second opinions; Natural field experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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