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Referral network and consumer trust

Author

Listed:
  • Fong, Yuk-fai
  • Lau, Tsz-him
  • Meng, Xiaoxuan
  • Zhao, Lin

Abstract

This paper studies repeated interactions between experts and consumers to explore how referral networks, where experts refer consumers to those with the appropriate areas of expertise within the network, promote trust and honesty. When consumers’ searches for second opinions are directed by referrals, they visit fewer experts before their problems are fixed. This results in experts meeting fewer consumers each period, limiting their opportunities to exploit consumers, thereby promoting truth-telling.

Suggested Citation

  • Fong, Yuk-fai & Lau, Tsz-him & Meng, Xiaoxuan & Zhao, Lin, 2025. "Referral network and consumer trust," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524006177
    DOI: 10.1016/j.econlet.2024.112133
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    More about this item

    Keywords

    Credence goods; Referral network; Trust building; Expert honesty;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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