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Credence Goods Monopolists


  • Emons, Winand


With a credence good, consumers are never sure about the extent of the good that they actually need. Experts such as doctors and lawyers, as well as auto mechanics and appliance service-persons (the sellers) not only provide the services, but also act as the expert in determining the customer's requirements. This information asymmetry between buyers and the seller creates strong incentives for the seller to cheat. We analyze whether the market mechanism may induce non-fraudulent seller behavior.

Suggested Citation

  • Emons, Winand, 1997. "Credence Goods Monopolists," Berkeley Olin Program in Law & Economics, Working Paper Series qt9c5508x4, Berkeley Olin Program in Law & Economics.
  • Handle: RePEc:cdl:oplwec:qt9c5508x4

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    References listed on IDEAS

    1. Jacob Glazer & Thomas G. McGuire, 1991. "The Economics of Referrals," Papers 0020, Boston University - Industry Studies Programme.
    2. Carolyn Pitchik & Andrew Schotter, 1993. "Information Transmission in Regulated Markets," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 815-829, November.
    3. 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.
    4. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
    5. Dana, James D, Jr & Spier, Kathryn E, 1993. "Expertise and Contingent Fees: The Role of Asymmetric Information in Attorney Compensation," Journal of Law, Economics, and Organization, Oxford University Press, vol. 9(2), pages 349-367, October.
    6. Wolfgang Pesendorfer & Asher Wolinsky, 2003. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 417-437.
    7. 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.
    8. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    9. Gaynor, Martin, 1994. "Issues in the Industrial Organization of the Market for Physician Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 211-255, Spring.
    10. Fridolin E. Marty, 1998. "Capacity as a Determinant of the Supply for Physicians' Services," Diskussionsschriften dp9805, Universitaet Bern, Departement Volkswirtschaft.
    11. repec:bla:joares:v:25:y:1987:i:1:p:68-89 is not listed on IDEAS
    12. Taylor, Curtis R, 1995. "The Economics of Breakdowns, Checkups, and Cures," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 53-74, February.
    13. Emons, Winand, 1989. "On the Limitation of Warranty Duration," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 287-301, March.
    14. Emons, Winand, 1988. "Warranties, moral hazard, and the lemons problem," Journal of Economic Theory, Elsevier, vol. 46(1), pages 16-33, October.
    15. Emons, Winand, 2000. "Expertise, contingent fees, and insufficient attorney effort," International Review of Law and Economics, Elsevier, vol. 20(1), pages 21-33, March.
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games


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