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Price Discrimination in Markets for Experts´ Services

This article studies the consequences of price discrimination in a market for experts´services. In the case of experts markets, where the expert observers the intervention that a consumer needs to fix his problem and also provides a treatment, price discrimination proceeds along the dimension of quality of advice offered. High quality advice and appropriate treatment is providid to the most profitable market segment only. Less profitable consumers are induced to demand either unnecessary or insufficient procedures. The welfare consequences of price discrimination are ambiguous: On the one hand, price discrimination increases the number of consumers that get an intervention. On the other hand, sone consumers that are efficiently served under nondiscrimination get the wrong procedure if the expert can discriminate among customers.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0312.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0312.

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Date of creation: Aug 2003
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Handle: RePEc:vie:viennp:0312
Contact details of provider: Web page: http://www.univie.ac.at/vwl

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  1. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
  2. Wolfgang Pesendorfer & Asher Wolinsky, 1998. "Second Opinions and Price Competition Inefficiency in the Market for Expert Advice," Discussion Papers 1229, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. 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.
  4. 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.
  5. Emons, Winand, 1997. "Credence Goods Monopolists," Berkeley Olin Program in Law & Economics, Working Paper Series qt9c5508x4, Berkeley Olin Program in Law & Economics.
  6. Dulleck, Uwe & Kerschbamer, Rudolf, 2001. "On Doctors, Mechanics and Computer Specialists. Or Where are the Problems with Credence Goods?," CEPR Discussion Papers 3016, C.E.P.R. Discussion Papers.
  7. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  8. Carolyn Pitchik & Andrew Schotter, 1993. "Information Transmission in Regulated Markets," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 815-29, November.
  9. Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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