Misconduct in Credence Good Markets

Jennifer Brown, Dylan B. Minor

NBER Working Paper No. 18608
Issued in December 2012
NBER Program(s):   IO

We examine misconduct in credence good markets with price taking experts. 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. We provide one plausible explanation, proposing a model in which price-taking experts extract surplus based on the value of their firm's brand or their own skill through increased misconduct. We also consider some alternative explanations for the observed differences between the misconduct of exclusive and independent experts.

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This paper was revised on May 16, 2013

Acknowledgments and Disclosures

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