When Do Experts Cheat and Whom Do They Target?

Yuk-fai Fong ()
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Yuk-fai Fong: Northwestern University

RAND Journal of Economics, 2005, vol. 36, issue 1, 113-130

Abstract: A credence good is a product or service whose usefulness or necessity is better known to the seller than to the buyer. This information asymmetry often persists even after the credence good is consumed. I propose two new theories of expert cheating, suggesting that identifiable heterogeneities among customers can cause expert sellers to defraud their customers. According to these theories, cheating arises as a substitute for price discrimination, and experts cheat selectively. For instance, experts target high-valuation and high-cost customers. Finally, selective cheating may damage the communication of useful information from customers to experts and result in inferior services.

Keywords: Asymmetric and Private Information Search; Learning; Information and Knowledge Information and Product Quality; Standardization and Compatibility Information (search for similar items in EconPapers)
JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (78)

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