IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Too much or too little? Price-discrimination in a market for credence goods

  • Uwe Dulleck

    ()

  • Rudolf Kerschbamer

    ()

  • Alexander Konovalov

    ()

In markets for credence goods sellers are better informed than their customers about the quality that yields the highest surplus from trade. This paper studies second-degree price-discrimination in such markets. It shows that discrimination regards the amount of advice offered to customers and that it leads to a different distortion depending on the main source of heterogeneity among consumers. If the heterogeneity is mainly in the expected cost of efficient service, the distortion involves overprovision of quality. By contrast, if consumers differ mainly in the surplus generated whenever the consumer's needs are met, the inefficiency involves underprovision of quality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2014-13.pdf
Download Restriction: no

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2014-13.

as
in new window

Length: 51
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:inn:wpaper:2014-13
Contact details of provider: Postal: Universitätsstraße 15, A - 6020 Innsbruck
Phone: 0512/507-7151
Fax: 0512/507-2788
Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
Email:


More information through EDIRC

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.:

as in new window
  1. Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, vol. 61(2), pages 187-194, November.
  2. Sergei Severinov & Raymond Deneckere, 2006. "Screening when some agents are nonstrategic: does a monopoly need to exclude?," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 816-840, December.
  3. Michael J. Ginzberg, 1981. "Early Diagnosis of MIS Implementation Failure: Promising Results and Unanswered Questions," Management Science, INFORMS, vol. 27(4), pages 459-478, April.
  4. Ting Liu, 2011. "Credence Goods Markets With Conscientious And Selfish Experts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 227-244, 02.
  5. Winand Emons, 1994. "Credence Goods and Fraudulent Experts," Diskussionsschriften dp9402, Universitaet Bern, Departement Volkswirtschaft.
  6. Figalli, Alessio & Kim, Young-Heon & McCann, Robert J., 2011. "When is multidimensional screening a convex program?," Journal of Economic Theory, Elsevier, vol. 146(2), pages 454-478, March.
  7. repec:rje:randje:v:37:y:2006:i:4:p:816-840 is not listed on IDEAS
  8. Winand Emons, 1995. "Credence Goods Monopolists," Diskussionsschriften dp9501, Universitaet Bern, Departement Volkswirtschaft.
  9. Henry S. Schneider, 2012. "Agency Problems and Reputation in Expert Services: Evidence from Auto Repair," Journal of Industrial Economics, Wiley Blackwell, vol. 60(3), pages 406-433, 09.
  10. Carolyn Pitchik & Andrew Schotter, 1993. "Information Transmission in Regulated Markets," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 815-29, November.
  11. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2011. "What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods," CESifo Working Paper Series 3461, CESifo Group Munich.
  12. Pitchik, Carolyn & Schotter, Andrew, 1987. "Honesty in a Model of Strategic Information Transmission," American Economic Review, American Economic Association, vol. 77(5), pages 1032-36, December.
  13. Gabszewicz, Jean J. & Wauthy, Xavier Y., 2002. "Quality underprovision by a monopolist when quality is not costly," Economics Letters, Elsevier, vol. 77(1), pages 65-72, September.
  14. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  15. Steffen Huck & Gabriele K. Ruchala & Jean-Robert Tyran, 2006. "Competition Fosters Trust," Discussion Papers 06-22, University of Copenhagen. Department of Economics.
  16. Beck, Adrian & Kerschbamer, Rudolf & Qiu, Jianying & Sutter, Matthias, 2013. "Shaping beliefs in experimental markets for expert services: Guilt aversion and the impact of promises and money-burning options," Games and Economic Behavior, Elsevier, vol. 81(C), pages 145-164.
  17. 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.
  18. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  19. Uwe Dulleck & Rudolf Kerschbamer, 2007. "Experts vs. Discounters: Consumer Free Riding and Experts Withholding Advice in Markets for Credence Goods," Working Papers 2007-21, Faculty of Economics and Statistics, University of Innsbruck.
  20. Ingela Alger & François Salanié, 2006. "A Theory of Fraud and Overtreatment in Experts Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 853-881, December.
  21. Besanko, David & Donnenfeld, Shabtai & White, Lawrence J, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 743-67, November.
  22. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  23. Yuk-fai Fong, 2005. "When Do Experts Cheat and Whom Do They Target?," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 113-130, Spring.
  24. 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.
  25. Carlier, Guillaume, 2001. "A general existence result for the principal-agent problem with adverse selection," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 129-150, February.
  26. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  27. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  28. Andrew F. Daughety & Jennifer F. Reinganum, 2013. "Search, bargaining, and signalling in the market for legal services," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 82-103, 03.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:inn:wpaper:2014-13. 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: (Janette Walde)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.