Personal Research, Second Opinions, and the Diagnostic Effort of Experts

81 Pages Posted: 17 Jul 2016 Last revised: 29 Dec 2016

See all articles by Ritu Agarwal

Ritu Agarwal

University of Maryland - Robert H. Smith School of Business

Che-Wei Liu

Indiana University Bloomington - Kelley School of Business

Kislaya Prasad

University of Maryland - Robert H. Smith School of Business

Date Written: December 28, 2016

Abstract

We investigate the effect of increasing the information endowment of customers in markets where experts provide both a diagnosis and the service under two alternative institutions: customers may either directly acquire information through personal research (PR) before consulting the expert or obtain a second opinion (SO) after diagnosis. We compute the equilibrium for these institutions and study their effects empirically in a series of experiments. We find that PR dominates the baseline (of no access to information for customers) and SO with respect to market efficiency, and extracts greater effort from experts. Customers exhibit a preference for PR over SO.

Keywords: Expert services, information acquisition, personal research, second opinions, credence goods

JEL Classification: D12, D82, I11

Suggested Citation

Agarwal, Ritu and Liu, Che-Wei and Prasad, Kislaya, Personal Research, Second Opinions, and the Diagnostic Effort of Experts (December 28, 2016). Robert H. Smith School Research Paper No. RHS 2809834, Available at SSRN: https://ssrn.com/abstract=2809834 or http://dx.doi.org/10.2139/ssrn.2809834

Ritu Agarwal

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Che-Wei Liu (Contact Author)

Indiana University Bloomington - Kelley School of Business ( email )

1309 E 10th Street, Hodge Hall 4100
Bloomington, IN 47405
United States

Kislaya Prasad

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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