Second Opinions in Markets for Expert Services: Experimental Evidence
57 Pages Posted: 22 Feb 2014 Last revised: 27 Jul 2018
Date Written: March 09, 2016
We experimentally investigate the role of second opinions in markets where experts such as physicians both diagnose and provide the services. Physicians may exploit their informational advantage and overtreat their patients by providing a more costly and expensive treatment than necessary. We show that introducing costly second opinions significantly reduces the level of overtreatment. Lowering search costs leads to significantly more second opinions, but the overtreatment level does not decrease. Under low but not under high search costs, market efficiency rises with the introduction of second opinions, as the reduction in treatment costs due to less overtreatment exceeds the increase in incurred search costs.
Keywords: Credence goods, Experts, Second opinion, Overtreatment, Search costs
JEL Classification: D82, L15
Suggested Citation: Suggested Citation