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Price Discrimination in Markets for Experts' Services

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  • Kerschbamer, Rudolf
  • Dulleck, Uwe

Abstract

This Paper studies the consequences of price discrimination in a market for experts? services. In the case of experts markets, where the expert observes the intervention that a consumer needs to fix his problem and also provides a treatment, price discrimination proceeds along the dimension of quality of advice offered. High quality advice and appropriate treatment is provided to the most profitable market segment only. Less profitable consumers are induced to demand either unnecessary or insufficient procedures. The welfare consequences of price discrimination are ambiguous: On the one hand, price discrimination increases the number of consumers that get an intervention. On the other hand, some consumers that are efficiently served under non-discrimination get the wrong procedure if the expert can discriminate among customers.

Suggested Citation

  • Kerschbamer, Rudolf & Dulleck, Uwe, 2003. "Price Discrimination in Markets for Experts' Services," CEPR Discussion Papers 4155, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4155
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    References listed on IDEAS

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    1. Carolyn Pitchik & Andrew Schotter, 1993. "Information Transmission in Regulated Markets," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 815-829, November.
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    More about this item

    Keywords

    Price discrimination; Credence goods; Experts; Fraud;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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