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Credence goods, costly diagnosis, and subjective evaluation

Bester, Helmut; Dahm, Matthias - 2014

We study contracting between a consumer and an expert. The expert can invest in diagnosis to obtain a noisy signal about whether a low-cost service is sufficient or whether a high-cost treatment is required to solve the consumerś problem. This involves moral hazard because diagnosis effort and...

Persistent link: https://www.econbiz.de/10010429934

Algorithmic advice as a credence good

Biermann, Jan; Horton, John J.; Walter, Johannes - 2022

Actors in various settings have been increasingly relying on algorithmic tools to support their decision-making. Much of the public debate concerning algorithms - especially the associated regulation of new technologies - rests on the assumption that humans can assess the quality of algorithms....

Persistent link: https://www.econbiz.de/10013499021

The role of diagnostic ability in markets for expert services

Liu, Fang; Rasch, Alexander; Schwarz, Marco; Waibel, … - 2020

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 … situation in which experts are heterogeneous in their diagnostic abilities. We find that efficient market outcomes are always …

Persistent link: https://www.econbiz.de/10012315945

Fact-checking politicians

Mattozzi, Andrea; Nocito, Samuel; Sobbrio, Francesco - 2022

We investigate the reaction of Italian Members of Parliament to a rigorous fact-checking of their public statements. Our research design relies on a novel randomized field experiment in collaboration with the leading Italian fact-checking company. Our results show that politicians are responsive...

Persistent link: https://www.econbiz.de/10013463503

Dynamic screening with verifiable bankruptcy

Krähmer, Daniel; Strausz, Roland - 2022

We consider a dynamic screening model where the agent may go bankrupt due to, for example, cash constraints. We model bankruptcy as a verifiable event that occurs whenever the agent makes a per period loss. This leads to less stringent truth-telling constraints than those considered in the...

Persistent link: https://www.econbiz.de/10014476119

Second-degree moral hazard in a real-world credence goods market

Balafoutas, Loukas; Kerschbamer, Rudolf; Sutter, Matthias - 2013 - This version: 16 October 2013

Empirical literature on moral hazard focuses exclusively on the direct impact of asymmetric information on market outcomes, thus ignoring possible repercussions. We present a field experiment in which we consider a phenomenon that we call second-degree moral hazard – the tendency of the supply...

Persistent link: https://www.econbiz.de/10010199693

Insurance in a market for credence goods

Sülzle, Kai; Wambach, Achim - 2002

goods, where prices are regulated by an authority, physicians act as experts. Due to their informational advantage …

Persistent link: https://www.econbiz.de/10011409200

Diagnostic uncertainty and insurance coverage in credence goods markets

Balafoutas, Loukas; Fornwagner, Helena; Kerschbamer, Rudolf - 2020

also uncover an important interaction effect: if consumers are insured, experts invest less in diagnostic precision. We …

Persistent link: https://www.econbiz.de/10012312079

Optimal procurement of a credence good under limited liability

Bester, Helmut; Yaofu, Ouyang - 2017

This paper analyzes the optimal contract for a consumer to procure a credence good from an expert when (i) the expert might misrepresent his private information about the consumer’s need, (ii) the expert might not choose the requested service since his choice of treatment is non-observable,...

Persistent link: https://www.econbiz.de/10011781931

A matter of taste : the negative welfare effect of expert judgments

Lagios, Nicolas; Méon, Pierre-Guillaume - 2024

We study how experts influence consumer behavior and welfare by focusing on the Booker Prize. Leveraging the …

Persistent link: https://www.econbiz.de/10015051678