The existing literature on credence goods and expert services has overlooked the importance of risk aversion. In this paper we extend a standard expert model of credence goods with verifiable service quality by considering risk-averse consumers. Our results show that the presence of risk...

In this paper we show that, in the presence of buyer and seller power, a monopolist can enter into a costly contractual relationship with a low-quality supplier with the sole intention of improving its bargaining position relative to a high-quality supplier, without ever selling the good...