Discussion Paper Details

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Title: Price Discrimination in Markets for Experts' Services

Author(s): Uwe Dulleck and Rudolf Kerschbamer

Publication Date: December 2003

Keyword(s): credence goods, experts, fraud and price discrimination

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Dulleck, U and Kerschbamer, R. 2003. 'Price Discrimination in Markets for Experts' Services'. London, Centre for Economic Policy Research.