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Personal research, second opinions, and the diagnostic effort of experts

Ritu Agarwal, Che-Wei Liu and Kislaya Prasad

Journal of Economic Behavior & Organization, 2019, vol. 158, issue C, 44-61

Abstract: We investigate the effect of increasing the information endowment of customers in markets where experts provide both a diagnosis and the service under two alternative institutions: customers may either directly acquire information through personal research (PR) before consulting the expert or obtain a second opinion (SO) after diagnosis. We compute the equilibrium for these institutions and study their effects empirically in a series of experiments. We find that PR dominates the baseline (of no access to information for customers) and SO with respect to market efficiency, and extracts greater effort from experts. Our results also indicate that decisions are optimal conditional on investment in information acquisition, and customers exhibit a preference for PR over SO. Finally, we find that lower information acquisition costs for customers in PR have positive effects on market efficiency.

Keywords: Expert services; Information acquisition; Personal research; Second opinions; Credence goods (search for similar items in EconPapers)
JEL-codes: D12 D82 I11 (search for similar items in EconPapers)
Date: 2019
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