Credence goods – regulation and competition

1. Credence goods – regulation and competition David Stallibrass | Director, Services and Public Markets UCL / HKU Conference | March 2011

2. A credence spectrum My job Medical advice Barristers Education Experience good Credence good Medical procedures Home repairs Audit Vitamins Primarily a consumerproblem: Asymmetric information Mitigated by brand power Dominance? Mitigated by regulation Protectionism?

3. Political economy Role of competition authority to represent those who do not exist yet

4. Three examples Focus of professional bodies is often on high entry barriers and raising standards  exacerbates competition problem

5. Information revolution Alternative approach: mitigate underlying information asymmetry by actively supporting transparency and consumer feedback 3: Challenge firms and professionals to compete on quality and know their customer 1: Open up performance and complaints data 2: Commit not to make defamation claims Often resisted by professional bodies  evidence of losing their focus? Consumers help each other to choose service provider right for them Firms and professionals have incentive and knowledge to improve their offering

6. Conclusion