Credence Goods Markets with Heterogeneous Experts
Joachim Heinzel ()
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Joachim Heinzel: Paderborn University
No 118, Working Papers CIE from Paderborn University, CIE Center for International Economics
In this paper, we analyze a credence goods model adjusted to the health care market with regulated prices and heterogeneous experts. Experts are physicians and are assumed to differ in their cost of treating a small problem. We investigate the effects of this heterogeneity on the physicians’ level of fraud and on the patients’ search for second opinions. We find that introducing a fraction of more efficient low-cost physicians always increases social welfare, but in some cases only because of the raised physicians’ surplus. When the low-cost physicians’ cost advantage is small, imposing a share of low-cost physicians does not change the equilibrium fraud level. When the cost advantage is large, however, different changes in the fraud level occur depending on the share of generated low-cost physicians, the search rate and the initial level of fraud.
Keywords: credence goods; treatment efficiency; heterogeneous experts; overcharging (search for similar items in EconPapers)
JEL-codes: D82 I11 L15 (search for similar items in EconPapers)
Pages: 25 pages
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Persistent link: https://EconPapers.repec.org/RePEc:pdn:ciepap:118
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