Logo
Munich Personal RePEc Archive

Efficient Liability in Expert Markets

Chen, Yongmin and Li, Jianpei and Zhang, Jin (2018): Efficient Liability in Expert Markets.

[thumbnail of MPRA_paper_104326.pdf]
Preview
PDF
MPRA_paper_104326.pdf

Download (243kB) | Preview

Abstract

When providing professional services, an expert may misbehave by either prescribing the "wrong" treatment for a consumer's problem or failing to exert proper effort to diagnose it. We show that under a range of liabilities the expert will recommend the appropriate treatment based on his private information if price margins for alternative treatments are close enough; however, a well-designed liability rule is essential for also motivating efficient diagnosis effort. We further demonstrate that unfettered price competition between experts may undermine the efficient role of liability, whereas either a minimum-price constraint or an obligation-to-serve requirement can restore it.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.