Does Word-of-Mouth Lead to Better Care? Evidence from Odisha, India

Word-of-mouth (WOM) recommendations from family and friends can substitute for absent quality certification and weak regulatory oversight. Whether such informal information improves or distorts patient decisions remains unclear. We study this question using original linked household and facility survey data from Odisha, India, covering 3,090 patient visits across 373 villages. Patients who choose providers based on recommendations spend more out-of-pocket on drugs and transportation. Yet, this additional spending does not translate into better outcomes: WOM is not associated with higher perceived care quality, and WOM users are significantly less likely to return to the same provider. To understand these patterns, we estimate an attentive logit model that separately identifies consideration and preference stages of provider choice. We find that WOM narrows attention to a smaller set of providers that are not higher-quality. Counterfactual simulations show that removing WOM-induced attention distortions does not significantly improve the quality of providers patients choose, while raising awareness towards other providers yields modest gains. These findings suggest that informal networks cannot reliably substitute for formal quality information systems in fragmented healthcare markets.