EconPapers    
Economics at your fingertips  
 

Liability and reputation in credence goods markets

Yuk-fai Fong and Ting Liu

Economics Letters, 2018, vol. 166, issue C, 35-39

Abstract: This paper studies the impact of liability on a credence-good seller’s incentives to maintain a good reputation. Credence-good markets are characterized by information asymmetry about the value of sellers’ services to consumers who must rely on sellers for diagnosis and treatment provision. Liability refers to the legal environment in which the seller is liable for fixing consumers’ problems after charging them the price for his treatment. When the seller is short-lived, liability mitigates information asymmetry and facilitates trade. Nevertheless, liability may undermine a long-lived seller’s incentive to maintain a good reputation and reduces market efficiency.

Keywords: Credence goods; Repeated purchase; Reputation; Liability (search for similar items in EconPapers)
JEL-codes: L10 L15 D8 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176518300351
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:166:y:2018:i:c:p:35-39

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-07-28
Handle: RePEc:eee:ecolet:v:166:y:2018:i:c:p:35-39