Diagnostic Uncertainty and Insurance Coverage in Credence Goods Markets

Loukas Balafoutas, Helena Fornwagner (), Rudolf Kerschbamer, Matthias Sutter and Maryna Tverdostup ()

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

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: 43
Date: 2023
New Economics Papers: this item is included in nep-ger, nep-hea and nep-mic
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Downloads: (external link)
https://www2.uibk.ac.at/downloads/c9821000/wpaper/2023-14.pdf (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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