Credence goods, costly diagnosis, and subjective evaluation
We study contracting between a consumer and an expert in a credence goods model when (i) the expert's choice of diagnosis effort is not observable, (ii) the expert might misrepresent his private information about the adequate treatment, and (iii) payments can depend only on the consumer’s subje...
| Main Authors: | , |
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| Format: | Article |
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Wiley
2018
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| Online Access: | https://eprints.nottingham.ac.uk/38969/ |
| _version_ | 1848795731142377472 |
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| author | Bester, Helmut Dahm, Matthias |
| author_facet | Bester, Helmut Dahm, Matthias |
| author_sort | Bester, Helmut |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We study contracting between a consumer and an expert in a credence goods model when (i) the expert's choice of diagnosis effort is not observable, (ii) the expert might misrepresent his private information about the adequate treatment, and (iii) payments can depend only on the consumer’s subjective evaluation of treatment success. We show that the first--best solution can always be implemented if the parties' discount factor is equal to one; a decrease in the discount factor makes obtaining the first--best more difficult. The first--best is also always implementable if separation of diagnosis and treatment is possible. |
| first_indexed | 2025-11-14T19:36:45Z |
| format | Article |
| id | nottingham-38969 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:36:45Z |
| publishDate | 2018 |
| publisher | Wiley |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-389692020-05-04T19:43:46Z https://eprints.nottingham.ac.uk/38969/ Credence goods, costly diagnosis, and subjective evaluation Bester, Helmut Dahm, Matthias We study contracting between a consumer and an expert in a credence goods model when (i) the expert's choice of diagnosis effort is not observable, (ii) the expert might misrepresent his private information about the adequate treatment, and (iii) payments can depend only on the consumer’s subjective evaluation of treatment success. We show that the first--best solution can always be implemented if the parties' discount factor is equal to one; a decrease in the discount factor makes obtaining the first--best more difficult. The first--best is also always implementable if separation of diagnosis and treatment is possible. Wiley 2018-06-30 Article PeerReviewed Bester, Helmut and Dahm, Matthias (2018) Credence goods, costly diagnosis, and subjective evaluation. Economic Journal, 128 (611). pp. 1367-1394. ISSN 1468-0297 http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12472/full doi:10.1111/ecoj.12472 doi:10.1111/ecoj.12472 |
| spellingShingle | Bester, Helmut Dahm, Matthias Credence goods, costly diagnosis, and subjective evaluation |
| title | Credence goods, costly diagnosis, and subjective evaluation |
| title_full | Credence goods, costly diagnosis, and subjective evaluation |
| title_fullStr | Credence goods, costly diagnosis, and subjective evaluation |
| title_full_unstemmed | Credence goods, costly diagnosis, and subjective evaluation |
| title_short | Credence goods, costly diagnosis, and subjective evaluation |
| title_sort | credence goods, costly diagnosis, and subjective evaluation |
| url | https://eprints.nottingham.ac.uk/38969/ https://eprints.nottingham.ac.uk/38969/ https://eprints.nottingham.ac.uk/38969/ |