Credence Goods, Experts and Risk Aversion

The existing literature in expert-customer relationship concludes that when: i) consumers are homogenous, ii) consumers are committed with an expert once this one makes a recommendation, and iii) the type of treatment provided is verifiable, an expert finds optimal to serve efficiently his customers. This work shows that the previous result may not occur when consumers are not risk-neutral. Our result, that holds in a monopoly setting and under Bertrand competition, suggests that risk averse consumers are more likely to be mistreated by experts.