Consumer Information in a Market for Expert Services
AbstractWe analyze the implications of heterogeneously informed consumers in a market for expert services. Our main question is to investigate whether uninformed consumers are the most likely victims of expert cheating. We show that when consumers are heterogeneously informed on their true benefit from an expensive treatment, there is no equilibrium where the expert only cheats uninformed consumers. In fact, informed high-value consumers are the most frequent victims of cheating. Surprisingly, more information on the consumer side increases the inefficiency of the market outcome in terms of the foregone, but required, treatments. When some consumers receive noisy information signals on whether their problem is serious or minor, while others remain uninformed, in the unique equilibrium the expert is truthful to all types of consumers, regardless of their information status.
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Bibliographic InfoPaper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0801.
Date of creation: Apr 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Web page: http://www.smu.edu/economics
Credence Goods; Expert Cheating; Consumer Information;
Other versions of this item:
- Hyndman, Kyle & Ozerturk, Saltuk, 2011. "Consumer information in a market for expert services," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 628-640.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-MIC-2008-04-15 (Microeconomics)
- NEP-MKT-2008-04-15 (Marketing)
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