Uwe Dulleck, Rudolf Kerschbamer, Alexander Konovalov

Too Much or Too Little? Price Discrimination in a Market for Credence Goods

Volume 180 () / Issue 1, pp. 106-143 (38)
Published 30.10.2023

article PDF
Free Content
In markets for credence goods, sellers are better informed than their customers about the quality that yields the highest surplus from trade. This paper studies second-degree price discrimination in such markets. It shows that discrimination regards the amount of advice offered to customers and that it leads to a different distortion depending on the main source of heterogeneity among consumers. If the heterogeneity is mainly in the expected cost of efficient service, the distortion involves overprovision of quality. By contrast, if consumers differ mainly in the surplus generated whenever the consumer's needs are met, the inefficiency involves underprovision of quality.

Uwe Dulleck No current data available.

Rudolf Kerschbamer No current data available.

Alexander Konovalov No current data available.