Treatment Delay in Credence Goods Markets

Yuk-fai Fong, Ting Liu, Xiaoxuan Meng and Lin Zhao

Journal of Institutional and Theoretical Economics (JITE), 2024, vol. 180, issue 1, 43-73

Abstract: This paper studies a credence goods market in which delaying treatments reduces treatment effectiveness, but doing so also allows the consumer to learn about the severity of her problem and the honesty of the expert. If consumers are homogeneous, cheating and treatment delay arise in equilibrium when the cost of delaying treatment is low. Suppose consumers have heterogeneous willingness to pay. If consumer heterogeneity is observable, high-valuation consumers are more likely to delay treatments and be victims of fraud. If the expert cannot observe consumer heterogeneity, low-valuation consumers are more likely to delay treatments and bear the cost of untreated minor problems.

Keywords: credencegoods; treatmentdelay; consumerlearning; credence goods; treatment delay; consumer learning (search for similar items in EconPapers)
JEL-codes: D82 L15 L84 L86 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1628/jite-2023-0032

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