Expert’s Recommendations in Product Choices: Information Provision, Conflicts of Interest, and Consumer Protection among U.S. Kidney Disease Patients

Consumers in high-stakes product markets, such as healthcare or finance, often rely on experts’ recommendations before making a purchase decision. However, how an expert constructs a specific set of recommendations and how it subsequently affects consumer choices and outcomes have been understudied. We propose an empirical framework that econometrically recovers experts’ recommendations and combines them with heterogeneous consumers’ choice of products or services. We then apply the framework to examine kidney disease patients’ choice of dialysis facilities. Using detailed data on more than 16,900 U.S. patients with kidney disease who had consultations with over 750 physicians between 2015 and 2017, we study physicians’ dialysis facility recommendations and patients’ subsequent choice of facilities. We find that physicians are more likely to recommend facilities with which they are affiliated and those close to patients. Policy simulations suggest that quality information provision through five-star ratings has likely lowered mortality, thereby helping patients. In contrast, reducing conflicts of interest by banning the usage of affiliation as a basis for physicians’ facility recommendations can inadvertently hurt patients as evidenced by an increase in mortality. The study provides relevant consumer-centric insights into recent efforts to change market regulations and policies in this healthcare market.