Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets

Loukas Balafoutas, Helena Fornwagner, Rudolf Kerschbamer, Matthias Sutter and Maryna Tverdostup
Additional contact information
Helena Fornwagner: University of Exeter, United Kingdom; Austrian Institute of Economic Research (WIFO)
Maryna Tverdostup: Vienna Institute for International Economic Studies, Austria

No 257, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: In markets for credence goods – such as health care or repair services – fraudulent behavior by better informed experts is a common problem. Our model studies how four common features shape experts’ provision behavior in credence goods markets: (i) diagnostic uncertainty of experts; (ii) insurance coverage of consumers; (iii) malpractice payments for treatment failure; and (vi) consumer-regarding preferences of experts. Diagnostic imprecision unambiguously leads to less efficient provision. Insurance coverage and malpractice payments have an ambiguous effect on efficient provision. The impact of consumer-regarding preferences on efficiency is positive without insurance but ambiguous in the presence of insurance.

Keywords: Credence goods; diagnostic uncertainty; insurance coverage; social preferences (search for similar items in EconPapers)
JEL-codes: D82 G22 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2023-10
New Economics Papers: this item is included in nep-hea and nep-mic
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Downloads: (external link)
https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_257_2023.pdf First version, 2023 (application/pdf)

Related works:
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2023)
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2023)
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2020)
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2020)
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2020)
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2020)
Working Paper: Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets (2020)
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