When your car makes a weird noise and the mechanic says you need a $1,200 repair, you’re stuck in a tough spot. Do you need that expensive part? Could a simpler fix work? Is the price fair? Most of us have no clue – we just have to trust the person in the grease-stained uniform.
Welcome to the world of credence goods – things we buy where we’re flying blind, even after we’ve paid for them.
Economists Darby and Karni coined this term back in the ’70s, but we’ve all experienced it. Think about the last time you visited a doctor, hired a lawyer, or called a plumber. You handed over your money, hoping they’d solve your problem, but you couldn’t judge if they did the right thing or took you for a ride.
This is different from other purchases. When you buy a sweater, you can feel the fabric before buying (a search for good quality). When you try a new restaurant, you might not know if it’s good until you eat there, but afterwards, you can say if the meal was worth it (an experience good).
But with credence goods? You’re often clueless before, during, and after. Your tooth stops hurting after that expensive procedure, but did you need a root canal, or would a filling have worked? Your financial advisor’s investment choices might take decades to prove wise or foolish.
The problem is that one side knows way more than the other. The expert has knowledge and training, while you’re at their mercy. This creates a perfect setup for potential exploitation – mechanics recommending unnecessary repairs, doctors ordering excessive tests, or consultants stretching out billable hours.
That’s why we develop workarounds: seeking second opinions, looking for certifications, reading reviews, or establishing relationships with trusted professionals. Government regulations and professional ethics codes also try to bridge this knowledge gap.
But at the end of the day, for many important services we buy, we’re still largely taking someone’s word that we got what we paid for.
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