Less is more : the search for expert advice

This paper considers a credence goods market in which each expert carries out a conditionally independent test before providing a recommendation to the customer. For instance, a patient with medical needs can consult multiple doctors, each providing a recommendation after a running a medical test. B...

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Main Authors: Dom, Vichet, Lee, Su Ann, Nguyen, Thi Minh Hue
Other Authors: Au Pak Hung
Format: Final Year Project
Language:English
Published: 2016
Subjects:
Online Access:http://hdl.handle.net/10356/66511
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-665112019-12-10T14:06:44Z Less is more : the search for expert advice Dom, Vichet Lee, Su Ann Nguyen, Thi Minh Hue Au Pak Hung School of Humanities and Social Sciences DRNTU::Social sciences This paper considers a credence goods market in which each expert carries out a conditionally independent test before providing a recommendation to the customer. For instance, a patient with medical needs can consult multiple doctors, each providing a recommendation after a running a medical test. Based on the recommendations received, the customer decides whether to undergo surgery or not in the end. We analyze the Bayesian Nash equilibrium of this game, and find that the experts distort their recommendation strategy knowing that the customer may seek others’ opinions. Our analysis allows us to identify the relationship between the number of doctors consulted and the patient’s search cost, his prior belief regarding the suitability of the surgery, as well as medical test accuracy. Finally, we compare the customer’s equilibrium payoff with that of an alternative scenario in which there is only one available expert. We find that the patient can be worse off if he has access to multiple opinions. The reason is that the experts’ distortion in recommendation strategy drastically worsens the quality of information transmission, resulting to an increase in the search cost that the customer incurred. Bachelor of Arts 2016-04-13T08:02:06Z 2016-04-13T08:02:06Z 2016 Final Year Project (FYP) http://hdl.handle.net/10356/66511 en Nanyang Technological University 65 p. application/pdf
institution Nanyang Technological University
building NTU Library
country Singapore
collection DR-NTU
language English
topic DRNTU::Social sciences
spellingShingle DRNTU::Social sciences
Dom, Vichet
Lee, Su Ann
Nguyen, Thi Minh Hue
Less is more : the search for expert advice
description This paper considers a credence goods market in which each expert carries out a conditionally independent test before providing a recommendation to the customer. For instance, a patient with medical needs can consult multiple doctors, each providing a recommendation after a running a medical test. Based on the recommendations received, the customer decides whether to undergo surgery or not in the end. We analyze the Bayesian Nash equilibrium of this game, and find that the experts distort their recommendation strategy knowing that the customer may seek others’ opinions. Our analysis allows us to identify the relationship between the number of doctors consulted and the patient’s search cost, his prior belief regarding the suitability of the surgery, as well as medical test accuracy. Finally, we compare the customer’s equilibrium payoff with that of an alternative scenario in which there is only one available expert. We find that the patient can be worse off if he has access to multiple opinions. The reason is that the experts’ distortion in recommendation strategy drastically worsens the quality of information transmission, resulting to an increase in the search cost that the customer incurred.
author2 Au Pak Hung
author_facet Au Pak Hung
Dom, Vichet
Lee, Su Ann
Nguyen, Thi Minh Hue
format Final Year Project
author Dom, Vichet
Lee, Su Ann
Nguyen, Thi Minh Hue
author_sort Dom, Vichet
title Less is more : the search for expert advice
title_short Less is more : the search for expert advice
title_full Less is more : the search for expert advice
title_fullStr Less is more : the search for expert advice
title_full_unstemmed Less is more : the search for expert advice
title_sort less is more : the search for expert advice
publishDate 2016
url http://hdl.handle.net/10356/66511
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