Credence Goods and Fraudulent Experts

Posted: 2 Apr 1997

See all articles by Winand Emons

Winand Emons

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR)

Abstract

This article is about a market for credence goods. With a credence good, consumers are never sure about the extent of the good they actually need. Therefore, sellers act as experts determining the customers' requirements. This information asymmetry between buyers and sellers obviously creates strong incentives for sellers to cheat on services. I analyze whether the market mechanism may induce nonfraudulent seller behavior. From the observation of market data such as prices, market shares, etc., consumers can infer the sellers' incentives. I show that market equilibria resulting in nonfraudulent behavior do indeed exist.

JEL Classification: D81, D82

Suggested Citation

Emons, Winand, Credence Goods and Fraudulent Experts. Rand Journal of Economics, Vol. 28, No. 1. Available at SSRN: https://ssrn.com/abstract=3855

Winand Emons (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Postfach 8573
CH-3001 Bern
Switzerland
+41 31 631 3922 (Phone)
+41 31 631 3783 (Fax)

HOME PAGE: http://staff.vwi.unibe.ch/emons

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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