Why Don’t People Trust Experts?
Credence goods such as health care, legal and financial services, and auto repair create a conflict of interest by requiring experts to diagnose and provide services to uninformed consumers. Mistreatment of consumers appears widespread empirically, but a simple explanation for mistreatment under realistic assumptions has proved elusive. I generalize Uwe Dulleck and Rudolf Kerschbamer’s credence-good model to incorporate the highly realistic assumption that consumers do not observe experts’ cost functions. The model guarantees equilibrium mistreatment in a wide range of price-setting and market environments. The model also yields testable implications regarding the nature of mistreating firms and the direction of mistreatment.
Hilger, Nathaniel G.
"Why Don’t People Trust Experts?,"
Journal of Law and Economics: Vol. 59
, Article 10.
Available at: https://chicagounbound.uchicago.edu/jle/vol59/iss2/10