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Building trust by qualification in a market for expert services

Author

Listed:
  • Schneider, Tim
  • Bizer, Kilian
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.

Suggested Citation

  • Schneider, Tim & Bizer, Kilian, 2017. "Building trust by qualification in a market for expert services," University of Göttingen Working Papers in Economics 309, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:309
    as

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    References listed on IDEAS

    as
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    6. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition," American Economic Review, American Economic Association, vol. 101(2), pages 526-555, April.
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    10. Dulleck, Uwe & Kerschbamer, Rudolf, 2009. "Experts vs. discounters: Consumer free-riding and experts withholding advice in markets for credence goods," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 15-23, January.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Green, Ellen P. & Kloosterman, Andrew, 2022. "Agent sorting by incentive systems in mission firms: Implications for healthcare and other credence goods markets," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 408-429.

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    More about this item

    Keywords

    credence goods; expert market; second opinions; diagnostic effort; qualification; laboratory experiment;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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