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. The paper presented in this ZEW Research Seminar analyzes whether this positive result carries over when experts are heterogeneous in their diagnostic abilities. It finds that efficient market outcomes are always possible. However, inefficient equilibria can also exist. When such inefficient equilibria are played, a larger share of high-ability experts can lead to more inefficiencies relative to the efficient equilibria.

Speaker

Marco A. Schwarz

University of Innsbruck, Austria

Location

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Date

23.01.2020 | 12:00 - 13:00 (CET)

Event Location

ZEW – Leibniz-Zentrum für Europäische Wirtschaftsforschung

L 7, 1 68161 Mannheim

Room

Heinz König Hall

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