Misconduct in Credence Good Markets
32 Pages Posted: 7 Dec 2012 Last revised: 7 May 2021
Date Written: December 2012
We examine misconduct in credence good markets with price taking experts. We propose a market-level model in which price-taking experts extract surplus based on the value of their firm's brand and their own skill. We test the predictions of the model using sales complaint data for exclusive and independent insurance agents. We find that exclusive insurance agents working for large branded firms are more likely to be the subject of a justified sales complaint, relative to independent experts, despite doing substantially less business. In addition, more experienced experts attract more complaints per year.
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