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Consumers and experts: an econometric analysis of the demand for water heaters

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Author Info
Soest, A. van
Bartels, R.
Fiebig, D.G. (Tilburg University, Center for Economic Research)

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Abstract

Consumers can accumulate product information on the basis of a combination of searching, product advertising and expert advice. Examples of experts who provide product information include doctors advising patients on treatments, motor mechanics diagnosing car problems and recommending repairs, accountants recommending investment strategies, and plumbers making recommendations on alternative water heaters. In each of these examples, the transactions involve the sale of goods and services where the seller is at the same time an expert providing advice on the amount and type of product or service to be purchased. In the case of water heaters, the plumber advising a consumer on their choice of water heater will most likely also install the appliance. Because of the information asymmetry there is potentially a strategic element in the transmission of information from expert to consumer. This paper reports on an econometric investigation of the factors that determine the choices made by consumers and the recommendations made by plumbers and the extent to which plumbers act in the best interests of their customers. The empirical work is made possible by the availability of stated preference data generated by designed experiments involving separate samples of Australian consumers and plumbers. We find some evidence that plumbers have higher preferences than consumers for heater characteristics that increase their profit margin.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 26.

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Date of creation: 2003
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Handle: RePEc:dgr:kubcen:200326

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Find related papers by JEL classification:
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Green, David Jay, 1983. "A Logit Model of the Selection of a Space Heating Fuel by Builders of New Single Family Housing," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 337-42, May. [Downloadable!] (restricted)
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  7. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November. [Downloadable!] (restricted)
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  16. Vijay Krishna & John Morgan, 2001. "A Model Of Expertise," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 747-775, May. [Downloadable!] (restricted)
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  17. Jeffrey A. Dubin, 1986. "Will Mandatory Conservation Promote Energy Efficiency in the Selection of Household Appliance Stocks?," The Energy Journal, International Association for Energy Economics, vol. 7(1), pages 99-118.
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  1. Jordan Louviere & Kenneth Train & Moshe Ben-Akiva & Chandra Bhat & David Brownstone & Trudy Cameron & Richard Carson & J. Deshazo & Denzil Fiebig & William Greene & David Hensher & Donald Waldman, 2005. "Recent Progress on Endogeneity in Choice Modeling," Marketing Letters, Springer, vol. 16(3), pages 255-265, December. [Downloadable!] (restricted)
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