When Do Experts Cheat and Whom Do They Target?
Volume: Volume 36, No. 1
Issue: Spring 2005
Pages: 113-130
Authors: Yuk-fai Fong
Title: When Do Experts Cheat and Whom Do They Target?
Abstract: A credence good is a product or service whose usefulness or necessity is better known to the seller than to the buyer. This information asymmetry often persists even after the credence good is consumed. I propose two new theories of expert cheating, suggesting that identifiable heterogeneities among customers can cause expert sellers to defraud their customers. According to these theories, cheating arises as a substitute for price discrimination, and experts cheat selectively. For instance, experts target high-valuation and high-cost customers. Finally, selective cheating may damage the communication of useful information from customers to experts and result in inferior services.