On Doctors, Mechanics and Computer Specialists. Or Where are the Problems with Credence Goods?
AbstractIn recent years various contributions have analyzed the credence goods problem under a wide variety of assumptions yielding equilibria exhibiting various degrees of inefficiencies and fraud. The variety of results has fostered the impression that the equilibrium behaviour of experts and consumers in credence goods markets sensitively depends on the details of the models. The present Paper shows that the results for the majority of the specified models can be reproduced in a very simple unifying framework. Our model is constructed so that an efficient solution is reached if a small number of critical assumptions are satisfied, and virtually all existing results on inefficiencies in the credence good market are obtained by relaxing one of these conditions. Existing results are generalized, some previous interpretations of the forces leading to the striking differences in outcomes are questioned, and a new source for inefficiencies is identified.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3016.
Date of creation: Oct 2001
Date of revision:
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Other versions of this item:
- Uwe Dulleck & Rudolf Kerschbamer, 2001. "On Doctors, Mechanics and Computer Specialists Or Where are the Problems with Credence Goods?," Vienna Economics Papers 0101, University of Vienna, Department of Economics.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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