The economics of professional services: lemon markets, credence goods, and C2C information sharing
We discuss how professional service markets are plagued by asymmetric information, by looking jointly at the literature stemming from the seminal work of Akerlof on the “market of lemons”, and at the definition of “credence good” which has been developed especially within the field of health economics. Since consumers cannot evaluate ex post the quality of purchased professional services when these are “credence goods”, they cannot rely with 100 % confidence on other consumers’ and experts’ signals about service providers’ quality. Hence, questions arise on the effectiveness of traditional market features highlighted in literature as market-enhancing when information asymmetry is an issue, namely: advertising, certification, reputation, and liability. Our analysis specifically focuses on consumer-provided knowledge by looking at recent development of Web-based rating and reviewing services. Results point to the fact that consumers in the U.S. heavily rely on such services, and they do so roughly in proportion to their consumption of each professional sector. Therefore, future research on professional services should include a “C2C search technology” when modeling consumer behaviors that allows to define how much each professional service is to be considered as pure or hybrid “credence good.” Copyright Springer-Verlag 2013
Volume (Year): 7 (2013)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: http://www.springer.com|
Web page: http://www.panpacificbusiness.org/
|Order Information:||Web: http://www.springer.com/business/journal/11628|
References listed on IDEAS
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.:
- Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
- Asher Wolinsky, 1993.
"Competition in a Market for Informed Experts' Services,"
RAND Journal of Economics,
The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
- Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-1346, December.
- Robert B. Ekelund & Franklin G. Mixon & Rand W. Ressler, 1995. "Advertising and information: an empirical study of search, experience and credence goods," Journal of Economic Studies, Emerald Group Publishing, vol. 22(2), pages 33-43, May.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Carl Shapiro, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 843-862. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:spr:svcbiz:v:7:y:2013:i:1:p:1-15. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.