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Second Opinions in Markets for Expert Services: Experimental Evidence

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Abstract

We experimentally investigate the role of second opinions in markets where experts like doctors both diagnose and provide the services. Experts may exploit their informational advantage over customers and overtreat by providing a more costly and expensive treatment than necessary. We show that introducing costly second opinions significantly reduces the level of overtreatment. Market efficiency rises as the reduction in treatment costs—due to less overtreatment—exceeds the increase in incurred search costs. Lowering customers’ search costs leads to significantly more second opinions, however, the overtreatment level does not decrease.

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  • Wanda Mimra & Alexander Rasch & Christian Waibel, 2014. "Second Opinions in Markets for Expert Services: Experimental Evidence," CER-ETH Economics working paper series 14/192, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:14-192
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    More about this item

    Keywords

    Credence goods; Experts; Second opinion; Overtreatment; Search costs.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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