Seminar (Dept. of Marketing)

Theme：When Do Experts Do Less for More? The Impact of Consumer Preference in Consultation Decision

Speaker：Xiaoyan Xu（Research Institute of Economics and Management, Southwestern University of Finance and Economics）

Time：2021-12-15 10:00

Address：Room 706, Mingde Business Building

Language：Chinese/English

Abstract：

The informational advantage that experts have over consumers on the nature of the problem, alongside its appropriate treatment, can either lead to expert induced excessive demand that is generated solely by the experts’ incentives but adds no value to the consumer, or can be inadequate to resolve the problem of the consumer. We show that a profit-maximizing expert utilizes both overtreatment and undertreatment as strategic tools to manage demand, the extent of which depends on other contextual factors, namely, consumer preference in consultation decision, as well as the interaction between the ex ante beliefs of the consumer and the ethics level of the expert market. In particular, we find that undertreatment can occur because of a consumer’s private information regarding preferences for treatment, and the possibility of multiple expert visits. By incorporating these two factors to better reflect the reality of the role of the consumer in expert services, we show that undertreatment can be used as a tool to induce subsequent demand for an unremedied problem, because of consumer’s private information on treatment preferences. Using a series of extensions, we validate the robustness of our findings, and broaden their generalizability to various settings in expert services.