On Doctors, Mechanics and Computer Specialists - The Economics of Credence Goods

50 Pages Posted: 18 Dec 2005  

Uwe Dulleck

University of Vienna - Department of Economics

Rudolf Kerschbamer

University of Innsbruck; Centre for Economic Policy Research (CEPR)

Abstract

Most of us need the services of an expert when our apartment's heating or our washing machine breaks down, or when our car starts to make strange noises. And for most of us commissioning an expert to solve the problem causes concern. This concern does not disappear even after repair and payment of the bill. On the contrary, one worries about paying for a service that was not provided, or receiving some unnecessary treatment.

This article studies the economics underlying these worries. Under which conditions do experts have an incentive to exploit the informational problems associated with markets for diagnosis and treatment? What types of fraud exist? What are the methods and institutions for dealing with these informational problems? Under which conditions does the market provide incentives to deter fraudulent behavior? And what happens if all or some of those conditions are violated?

Keywords: Credence Goods, Experts, Fraud

JEL Classification: L15, D82, D40

Suggested Citation

Dulleck, Uwe and Kerschbamer, Rudolf, On Doctors, Mechanics and Computer Specialists - The Economics of Credence Goods. Journal of Economic Literature, March 2006 . Available at SSRN: https://ssrn.com/abstract=870788

Uwe Dulleck

University of Vienna - Department of Economics ( email )

Bruennerstrasse 72
Vienna, A-1210
Austria
+43 1 4277 374 ext. 27 (Phone)
+43 1 4277 9374 (Fax)

Rudolf Kerschbamer (Contact Author)

University of Innsbruck ( email )

Universitaetsstrasse 15
Innsbruck, A - 6020
Austria
+43 512 507 7400 (Phone)
+43 512 507 2980 (Fax)

HOME PAGE: http://www.uibk.ac.at/c/c4/c409/staff/

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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