Working Paper: CEPR ID: DP4155
Authors: Uwe Dulleck; Rudolf Kerschbamer
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.
Keywords: Credence goods; Experts; Fraud; Price discrimination
JEL Codes: D40; D82; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price discrimination (D40) | number of consumers receiving an intervention (D18) |
| price discrimination (D40) | quality of service provided (L15) |
| price discrimination (D40) | allocation of treatment quality based on consumer risk profiles (G52) |