This thesis aims to complement the existing literature on credence goods by considering expert services in a queuing setting, where customers may choose to obtain service from competing service providers, and where waiting time is a concern.

We investigate the conditions under which experts would overprovide services. For a monopoly expert, we find that with ample demand, there will be overprovision in equilibrium when revenue becomes more of a concern than throughput. An expert who faces limited demand will set at least as much overprovision when compared to one who faces ample demand.

When an expert overprovides, customers would expect to pay more, and expect to wait longer, due to longer individual services. Therefore, with more overprovision, fewer customers will arrive and...[ Read more ]

This thesis aims to complement the existing literature on credence goods by considering expert services in a queuing setting, where customers may choose to obtain service from competing service providers, and where waiting time is a concern.

We investigate the conditions under which experts would overprovide services. For a monopoly expert, we find that with ample demand, there will be overprovision in equilibrium when revenue becomes more of a concern than throughput. An expert who faces limited demand will set at least as much overprovision when compared to one who faces ample demand.

When an expert overprovides, customers would expect to pay more, and expect to wait longer, due to longer individual services. Therefore, with more overprovision, fewer customers will arrive and receive service. Due to the existence of overprovision, counter-intuitive situations may occur. For example, an increase in customer's service value could discourage arrivals.

We propose an overprovision-mitigating mechanism, which allows a social planner to adjust reimbursements to experts, while keeping customer's payments the same and the expert's annual total reimbursement unchanged.

We find that although competition will never cause more overprovision, it does not always discourage overprovision. For competition from experts who specialize in a simple treatment, the original expert may be driven to specialize in a different treatment, or may simply reduce his overprovision level to attract customers.

For competition between identical experts, overprovision could be discouraged with limited demand but not ample demand. The greater the potential demand, and the deeper fee structures are more than proportional, the less likely competition will make an impact. We compute equilibria for numerical examples, and find that there may be unique or multiple equilibria.

The amount of customers that an expert can gain from others- the throughput effect-increases with competition. Therefore, with more experts in competition, the more likely competition makes an impact.