9. Credence Goods

Question 1

What are credence goods?

Answer 1

Goods and services where the seller knows more then the buyer about the quality the buyer needs

Question 2

What are classic cases of credence goods?

Answer 2

Taxis, car repairs, medical services, financial services

Question 3

What are the 3 types of issue that may arise from credence goods

Answer 3

1. Under treatment- given low when they need high
2. Over treatment- given high when they need low
3. Over charging- given low but charged for high

Question 4

How does non-experimental data support credence good theory?

Answer 4

Rates of caesarean/ natural childbirth vary with returns to supplier via healthcare insurance

Question 5

What is the issue with Jon-experimental data?

Answer 5

It is hard to assess the scale of detriment- how much goes unobserved?
Hard to assess mechanisms influencing presence/ extent of detriment

Question 6

Findings of taxi drivers experiment in Athens

Answer 6

Non locals are taken on further routes and overcharged more than natives

Question 7

Results of computer repair experiment

Answer 7

Large treatment difference in repair costs when customers have insurance.

Question 8

Results of computer repair experiment when suggested diagnosis is given?

Answer 8

Correct diagnosis doesn’t reduce price. Incorrect diagnosis doubles the price