When Do Experts Cheat and Whom Do They Target?
AbstractA credence good is a product or service whose usefulness or necessity is better known to the seller than to the buyer. This information asymmetry often persists even after the credence good is consumed. I propose two new theories of expert cheating, suggesting that identifiable heterogeneities among customers can cause expert sellers to defraud their customers. According to these theories, cheating arises as a substitute for price discrimination, and experts cheat selectively. For instance, experts target high-valuation and high-cost customers. Finally, selective cheating may damage the communication of useful information from customers to experts and result in inferior services.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 36 (2005)
Issue (Month): 1 (Spring)
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Web page: http://www.rje.org
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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- Silvia Martínez-Gorricho, 2014. "Information and consumer fraud in a signalling model," Working Papers. Serie AD 2014-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Liu, Ting, 2006.
"Credence Goods Markets with Conscientious and Selfish Experts,"
1106, University Library of Munich, Germany.
- Liu, Ting, 2006. "Credence Goods Markets with Conscientious and Selfish Experts," MPRA Paper 1107, University Library of Munich, Germany, revised 10 Sep 0007.
- Ting Liu, 2006. "Credence Goods Markets with Conscientious and Selfish Experts," Boston University - Department of Economics - Working Papers Series WP2006-058, Boston University - Department of Economics.
- Uwe Dulleck & Rudolf Kerschbamer & Alexander Konovalov, 2014.
"Too much or too little? Price-discrimination in a market for credence goods,"
2014-13, Faculty of Economics and Statistics, University of Innsbruck.
- Dulleck, Uwe & Kerschbamer, Rudolf & Konovalov, Alexander, 2014. "Too Much or Too Little? Price-Discrimination in a Market for Credence Goods," Working Papers in Economics 582, University of Gothenburg, Department of Economics, revised Apr 2014.
- Seung Lee, 2013. "Ethics and Expertise: A Social Networks Perspective," Journal of Business Ethics, Springer, vol. 118(3), pages 607-621, December.
- Andrew F. Daughety & Jennifer F. Reinganum, 2011. "Search, Bargaining, And Agency in the Market for Legal Services," Vanderbilt University Department of Economics Working Papers 1106, Vanderbilt University Department of Economics.
- Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition," American Economic Review, American Economic Association, vol. 101(2), pages 526-55, April.
- Maarten Janssen & Alexei Parakhonyak, 2011. "Sårvice Refusal in Regulated Markets for Credence Goods," HSE Working papers WP BRP 08/EC/2011, National Research University Higher School of Economics.
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