Personal Research, Second Opinions, and the Diagnostic Effort of Experts
81 Pages Posted: 17 Jul 2016 Last revised: 29 Dec 2016
Date Written: December 28, 2016
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
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