Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/156328
Authors: 
Schneider, Tim
Bizer, Kilian
Year of Publication: 
2017
Series/Report no.: 
Discussion Papers, Center for European, Governance and Economic Development Research 309
Abstract: 
Markets for credence goods are classified by experts alone being able to identify consumers' problems and determine appropriate services for solution. Examining a market where experts have to invest in costly diagnosis to correctly identify problems and consumers being able to visit multiple experts for diagnosis, we introduce heterogeneously qualified experts. We assume that high skilled experts can identify problems with some probability even with low effort, e.g. due to education or experience. In a laboratory experiment we show that, against our theoretical predictions, this does not lead to a drop in experts' willingness for high diagnostic effort. However, consumers generally distrust experts' diagnosis effort as they buy less often after their first recommendation than it would be optimal and show frequently other non-optimal behavior patterns, e.g. receiving recommendations but do not buy service. Our results indicate that, at some level, introducing higher qualified experts increases the quality of diagnosis, as well as consumers' trust resulting in more and quicker service purchases.
Subjects: 
credence goods
expert market
second opinions
diagnostic effort
qualification
laboratory experiment
JEL: 
C70
C91
D40
Document Type: 
Working Paper

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