Does the market punish aggressive experts? Evidence from cesarean sections

David Stuart Dranove*, Subramaniam Ramanarayanan, Andrew Sfekas

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

In many credence goods markets, a seller simultaneously diagnoses a problem and offers a recommendation to fix it. One might wonder what prevents these sellers from always exaggerating their customer's needs. In this paper, we offer a simple explanation, namely, consumers may spurn sellers who have a reputation for such "demand inducement." We test this explanation by examining patient choice of obstetrician in Florida. In most of the counties that we study, we find that maternity patients are significantly less likely to choose obstetricians who perform more than the expected number of cesarean sections. We address simultaneity by instrumenting for "inducement propensity" using information about the obstetrician's training. Although the instrument is weak, a series of robustness tests suggests that our findings are plausible while ruling out alternative explanations.

Original languageEnglish (US)
Article number6
JournalB.E. Journal of Economic Analysis and Policy
Volume11
Issue number2
DOIs
StatePublished - Jan 1 2011

Keywords

  • cesarean
  • experts
  • reputation

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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