Martin Obradovits, Philipp Plaickner

Searching for Treatment

Volume 180 () / Issue 1, pp. 144-186 (43)
Published 30.10.2023

43,00 € including VAT
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n markets for expert credence goods such as medical treatments and technical repairs, overtreatment is a common problem. However, when experts are free to choose treatment prices, this behavior is difficult to rationalize. We explain overtreatment in a model where consumers can seek treatment from an informed, liable expert or purchase speculative minor treatments from fringe firms, with costly search. Next to overtreatment, we show that wasteful search and the purchase of ineffective treatments may occur in equilibrium. Welfare is non-monotonic in search costs and can even be maximal when these are large. Expert competition may not mitigate market distortions.

Martin Obradovits No current data available.

Philipp Plaickner No current data available.