Arbeitspapier
The Role of Diagnostic Ability in Markets for Expert Services
In credence goods markets, experts have better information about the appropriate quality of treatment than their customers. Experts may exploit their informational advantage by defrauding customers. Market institutions have been shown theoretically to be effective in mitigating fraudulent expert behavior. We analyze whether this positive result carries over to a situation in which experts are heterogeneous in their diagnostic abilities. We find that efficient market outcomes are always possible. However, inefficient equilibria can also exist. If, in equilibrium, experts provide diagnosis-independent treatments, an increase in experts’ ability or in the probability of high-ability experts might not improve relative market efficiency.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 8704
- Classification
-
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Information and Product Quality; Standardization and Compatibility
- Subject
-
credence good
diagnosis
expert
fraud
overtreatment
undertreatment
- Event
-
Geistige Schöpfung
- (who)
-
Liu, Fang
Rasch, Alexander
Schwarz, Marco Alexander
Waibel, Christian
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and Ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2020
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Liu, Fang
- Rasch, Alexander
- Schwarz, Marco Alexander
- Waibel, Christian
- Center for Economic Studies and Ifo Institute (CESifo)
Time of origin
- 2020
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