CONSUMER DISUTILITY FROM ASSORTED REFERRALS IN DIAGNOSTICS SERVICES
This paper highlights the moral hazard problem in credence goods offered in the market as referral services. Credence Goods includes goods purchased with trust that is not observed by consumers who make the purchase, which makes disutility on the consumer. The paper aims to determine if both the imposition of penalty by authority or transparency in tariff can offset the problem of moral hazard in the relationship. This paper suggests minimising disutility to the consumer agent in a framework of penalty for lapses on the part of the principal service provider. We conclude that consumers will respond to transparency in tariffs, and unless informal units turn formal, consumers will continue to pay moral hazard costs