IDEAS home Printed from https://ideas.repec.org/a/mhr/jinste/urnsici0932-4569(201309)1693_531caeiic_2.0.tx_2-1.html
   My bibliography  Save this article

Competition and Endogenous Impatience in Credence-Good Markets

Author

Listed:
  • Jeremy Sandford

Abstract

In markets for credence goods, such as doctor visits, customers sample a firm for a few periods, before deciding whether to retain or fire that firm. In our model, customers have endogenously determined patience in tolerating bad outcomes from credence-good providers. The more competitive the market, the more options customers have away from a firm, and so the less tolerant of bad outcomes she will be. Competition thus increases equilibrium firm effort, as providers work harder to impress impatient customers. Higher effort raises customer surplus and helps balance the informational advantages providers enjoy in credence-good markets.

Suggested Citation

  • Jeremy Sandford, 2013. "Competition and Endogenous Impatience in Credence-Good Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(3), pages 531-565, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201309)169:3_531:caeiic_2.0.tx_2-1
    DOI: 10.1628/093245613X669420
    as

    Download full text from publisher

    File URL: https://www.mohrsiebeck.com/en/article/competition-and-endogenous-impatience-in-credence-good-markets-101628093245613x669420
    Download Restriction: Fulltext access is included for subscribers to the printed version.
    File URL: https://libkey.io/10.1628/093245613X669420?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
    2. Al-Najjar, Nabil Ibraheem, 1995. "Decomposition and Characterization of Risk with a Continuum of Random Variables," Econometrica, Econometric Society, vol. 63(5), pages 1195-1224, September.
    3. Bar-Isaac, Heski, 2005. "Imperfect competition and reputational commitment," Economics Letters, Elsevier, vol. 89(2), pages 167-173, November.
    4. James D. Dana Jr. & Yuk‐Fai Fong, 2011. "Product Quality, Reputation, And Market Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(4), pages 1059-1076, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Greenfield, Daniel, 2014. "Competition and service quality: New evidence from the airline industry," Economics of Transportation, Elsevier, vol. 3(1), pages 80-89.
    2. Susan Feng Lu & Konstantinos Serfes & Gerard Wedig & Bingxiao Wu, 2021. "Does Competition Improve Service Quality? The Case of Nursing Homes Where Public and Private Payers Coexist," Management Science, INFORMS, vol. 67(10), pages 6493-6512, October.
    3. Kang Hua Cao & Betty Krier & Chia-Mei Liu & Brian McNamara & Jerrod Sharpe, 2017. "The Nonlinear Effects of Market Structure on Service Quality: Evidence from the U.S. Airline Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(1), pages 43-73, August.
    4. Daniel Monte & Ideen Riahi & Nikolaus Robalino, 2019. "Collusion and turnover in experience goods markets," Review of Economic Design, Springer;Society for Economic Design, vol. 23(3), pages 91-111, December.
    5. Alcalá, Francisco & González-Maestre, Miguel & Martínez-Pardina, Irene, 2014. "Information and quality with an increasing number of brands," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 109-117.
    6. Péter Eso & Balázs Szentes, 2004. "The Price of Advice," Discussion Papers 1416, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Pan, Jay & Qin, Xuezheng & Li, Qian & Messina, Joseph P. & Delamater, Paul L., 2015. "Does hospital competition improve health care delivery in China?," China Economic Review, Elsevier, vol. 33(C), pages 179-199.
    8. Bakalli, Gaetan & Guerrier, Stéphane & Scaillet, Olivier, 2023. "A penalized two-pass regression to predict stock returns with time-varying risk premia," Journal of Econometrics, Elsevier, vol. 237(2).
    9. HEIFETZ, Aviad & MINELLI, Enrico & POLEMARCHAKIS, Heracles, 1999. "Arbitrage and equilibrium with exchangeable risks," LIDAM Discussion Papers CORE 1999046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. David Bardey & Denis Gromb & David Martimort & Jérôme Pouyet, 2020. "Controlling Sellers Who Provide Advice: Regulation and Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 68(3), pages 409-444, September.
    11. Hoffmann, Robert & Chesney, Thomas & Chuah, Swee-Hoon & Kock, Florian & Larner, Jeremy, 2020. "Demonstrability, difficulty and persuasion: An experimental study of advice taking," Journal of Economic Psychology, Elsevier, vol. 76(C).
    12. Yongmin Chen & Jianpei Li & Jin Zhang, 2022. "Efficient Liability In Expert Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(4), pages 1717-1744, November.
    13. Ashish Arora & Andrea Fosfuri, 2005. "Pricing Diagnostic Information," Management Science, INFORMS, vol. 51(7), pages 1092-1100, July.
    14. Liangfei Qiu & Arunima Chhikara & Asoo Vakharia, 2021. "Multidimensional Observational Learning in Social Networks: Theory and Experimental Evidence," Information Systems Research, INFORMS, vol. 32(3), pages 876-894, September.
    15. Bisin, Alberto & Verdier, Thierry, 2001. "The Economics of Cultural Transmission and the Dynamics of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 298-319, April.
    16. Kick, Markus, 2015. "The Price Premium Induced by Branding: A Health Care Case Study," EconStor Preprints 182504, ZBW - Leibniz Information Centre for Economics.
    17. Bejarano, Hernán & Green, Ellen P. & Rassenti, Stephen, 2017. "Payment scheme self-selection in the credence goods market: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 396-403.
    18. Thomas Liebi, 2002. "Monitoring Eco-Labels: You Can Have Too Much of a Good Thing," Diskussionsschriften dp0207, Universitaet Bern, Departement Volkswirtschaft.
    19. Rudolf Kerschbamer & Matthias Sutter & Uwe Dulleck, 2009. "The Impact of Distributional Preferences on (Experimental) Markets for Expert Services," Working Papers 2009-28, Faculty of Economics and Statistics, Universität Innsbruck.
    20. Alberto Bisin & Danilo Guaitoli, 2004. "Moral Hazard and Nonexclusive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 306-328, Summer.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:jinste:urn:sici:0932-4569(201309)169:3_531:caeiic_2.0.tx_2-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Wolpert (email available below). General contact details of provider: https://www.mohrsiebeck.com/jite .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.