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Credence Goods Markets with Conscientious and Selfish Experts

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  • Ting Liu

    () (Boston University, Department of Economics)

Abstract

I study credence goods markets when there are both sel sh and conscientious experts. The selfish expert is a pro t maximizer. The conscientious expert wants to maximize pro t and repair the consumer's problem. There are two classes of equilibria: uniform-price equilibria and nonuniform-price equilibria. A consumer cannot infer the expert's type from his price list in a uniform-price equilibrium but can do that in a nonuniform-price equilibrium. When the fraction of the conscientious expert is small, the sel sh expert will be honest about the severity of the consumer's problem. When the fraction of the conscientious expert is large, the sel sh expert will cheat the consumer; overcharging the consumer whenever he o ers to repair the problem. Finally, more conscientious experts may result in a larger social loss.

Suggested Citation

  • Ting Liu, 2006. "Credence Goods Markets with Conscientious and Selfish Experts," Boston University - Department of Economics - Working Papers Series WP2006-058, Boston University - Department of Economics.
  • Handle: RePEc:bos:wpaper:wp2006-058
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Uwe Dulleck & Rudolf Kerschbamer & Alexander Konovalov, 2014. "Too much or too little? Price-discrimination in a market for credence goods," Working Papers 2014-13, Faculty of Economics and Statistics, University of Innsbruck.
    2. Chen, Yongmin & Li, Jianpei & Zhang, Jin, 2017. "Liability in Markets for Credence Goods," MPRA Paper 80206, University Library of Munich, Germany.
    3. Li, Jianpei & Ouyang, Yaofu, 2016. "Expert Costs and the Role of Verifiability," MPRA Paper 74390, University Library of Munich, Germany.
    4. Ouyang, Yaofu, 2016. "Credence Goods, Risk Averse, and Optimal Insurance," MPRA Paper 70392, University Library of Munich, Germany.
    5. Fong, Yuk-fai & Liu, Ting & Wright, Donald J., 2014. "On the role of verifiability and commitment in credence goods markets," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 118-129.
    6. Dulleck, Uwe & Kerschbamer, Rudolf, 2009. "Experts vs. discounters: Consumer free-riding and experts withholding advice in markets for credence goods," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 15-23, January.
    7. Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, University of Innsbruck.
    8. Chris Kuo, 2013. "Billing Abuses by the Experts: A Game-Theoretic Analysis of Legal Services," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 9(1), pages 13-30, January.

    More about this item

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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