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Personal research, second opinions, and the diagnostic effort of experts

Author

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  • Agarwal, Ritu
  • Liu, Che-Wei
  • Prasad, Kislaya

Abstract

We investigate the effect of increasing the information endowment of customers in markets where experts provide both a diagnosis and the service under two alternative institutions: customers may either directly acquire information through personal research (PR) before consulting the expert or obtain a second opinion (SO) after diagnosis. We compute the equilibrium for these institutions and study their effects empirically in a series of experiments. We find that PR dominates the baseline (of no access to information for customers) and SO with respect to market efficiency, and extracts greater effort from experts. Our results also indicate that decisions are optimal conditional on investment in information acquisition, and customers exhibit a preference for PR over SO. Finally, we find that lower information acquisition costs for customers in PR have positive effects on market efficiency.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jeborg:v:158:y:2019:i:c:p:44-61
    DOI: 10.1016/j.jebo.2018.11.012
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    References listed on IDEAS

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    More about this item

    Keywords

    Expert services; Information acquisition; Personal research; Second opinions; Credence goods;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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