Personal research, second opinions, and the diagnostic effort of experts.

Highlights • We investigate the effect of increasing the information endowment of customers in markets where experts provide both a diagnosis and the service under two alternative institutions: customers may either directly acquire information through personal research (PR) before consulting the expert or obtain a second opinion (SO) after diagnosis. • We compute the equilibrium for these institutions and study their effects empirically in a series of experiments. • We find that PR dominates both the baseline (of no access to information for customers) and SO with respect to market efficiency, and extracts greater effort from experts. • Customers exhibit a preference for PR over SO. Abstract We investigate the effect of increasing the information endowment of customers in markets where experts provide both a diagnosis and the service under two alternative institutions: customers may either directly acquire information through personal research (PR) before consulting the expert or obtain a second opinion (SO) after diagnosis. We compute the equilibrium for these institutions and study their effects empirically in a series of experiments. We find that PR dominates the baseline (of no access to information for customers) and SO with respect to market efficiency, and extracts greater effort from experts. Our results also indicate that decisions are optimal conditional on investment in information acquisition, and customers exhibit a preference for PR over SO. Finally, we find that lower information acquisition costs for customers in PR have positive effects on market efficiency. [ABSTRACT FROM AUTHOR]