Saveliy O. Zhorin To Question Moral Hazard in Markets for Credence Goods

DOI: 10.38050/2078-3809-2025-17-4-173-199

Abstract

This article provides an overview of studies related to the problem of moral hazards in markets for credence goods (medical services, car service and so on). Three different forms of moral hazard inherent in these markets are described: undertreatment, overtreatment and overcharging.  Based on empirical studies, we analyze such determinants of moral hazards as level of information asymmetry, second-degree moral hazard, consumer socioeconomic status, competition level, social preferences, material and reputational incentives of expert. We also discuss the following ways to mitigate the moral hazard problem in markets for credence goods – separation of diagnostics and treatment, and internet rating platforms. The results of the study can find their practical application as teaching materials in the course «Institutional Economic Theory» for bachelor’s degree.

Keywords: credence goods, moral hazard, opportunism, asymmetric information.

JEL: D82, D23, D18, C93.

For citation: Zhorin, S.O. (2025) To Question Moral Hazard in Markets for Credence Goods. Scientific Research of Faculty of Economics. Electronic Journal, vol. 17, no. 4, pp. 173-199. DOI: 10.38050/2078-3809-2025-17-4-173-199.

Download