EFFICIENT LIABILITY IN EXPERT MARKETS

When providing professional services, an expert may misbehave by either prescribing “wrong” treatment for consumer's problem or failing to exert proper effort diagnose it. We show that under a range of liabilities the will recommend appropriate based on his private information if markups alternative treatments are close enough; however, well-designed liability rule is essential also motivating efficient diagnosis effort. further demonstrate unfettered price competition between experts undermine role liability, whereas minimum-price constraint obligation-to-serve requirement can restore