Credence goods are special kinds of goods that have qualities that might not be detected by customers subsequent to their purchase thus making it rather intricate to appraise their utility. In other instances, they are usually referred to as expert services. Each of these professional products is based on the universal fact that the supplier does not just offer repair services but similarly operates as a specialist in determining the level of treatment that is deemed essential. This is because the client is foreign to the sophistication and idiosyncrasies of goods that are being questioned. The consumers seem not to be aware of their requirements yet they are in a position to gauge the derived utility. Classical illustrations of credence goods or expert services entail:
Medicinal treatment
Medical experts perhaps know more of the kind of medical treatment the clients require than the clients themselves. The experts in addition have the monetary stake when making a judgment about the type of treatment that should be offered. This amounts to a credence-goods dilemma given that doctors are required to establish and provide treatment to uninformed consumers. As a result, higher charges might be demanded inadequate services rendered.
Services of an auto repair
When a car is taken for repairs in a motor vehicle garage, the expert sellers dubbed as the mechanic might deceive the consumer by offering inadequate repairs. For instance, the expert might opt to replace many parts that are considered essential to ensure that the vehicle goes back to the road. In return, higher costs will be levied on the extra materials used in addition to the time taken. On the other hand, the expert might offer fitting repairs while charging the client a higher price than what has been done. Thus, offering auto repair services to clients might lead to problems such as the provision of under treatment although overcharging or overtreatment while overcharging. The clients in both cases are uniform (Alger and Francois 857).
Supply of various software programs
The attribute of credence goods is that even though clients can detect the derived value from the merchandise ex-post, it is difficult to conclude if the obtained value of such goods is the required ex-ante. Besides, the customers might be ex-post incapable of observing the kind and quality they obtained. The professional vendors of software programs nonetheless are capable of identifying both quality and kind which suits the consumers’ demands through carrying out the diagnosis. At this point, the expert might provide the correct quality of a demanded software program while charging a price for it or consequently decide to utilize the asymmetrical information to defraud the customers (Alger and Francois 857).
Testimonials are classified ads that use printed or vocal quotes from prominent persons to praise the probable best traits or quality of a given product. In most cases, goods bearing claims that exceptional manufacturing standards which are unobservable to clients have become a popular promotional strategy. Such strategies are employed to increase customers’ demand for improved, harmless and ecological friendly merchandise. However, product labels usually make overt assertions about manufacturing techniques or features that are invisible to clients. Because consumers are incapable of observing the factual quality even after product consumption, there ought to be properly devised incentive mechanisms to encourage sellers and firms to offer superior products (Baksi and Pinaki 412)
Outside of third-party monitoring is amongst the best approaches that could be applied to ensure that firms offer high-value products with manufacturing standard assertions. Monitoring permits the reputation upshots to augment the encouragement for quality. Therefore, as commodities that bear invisible quality traits become more and more marketed while they possess quality information concerns, their insinuations for the global market incessantly tend to gain reputation. Very good examples of credence goods where I have witnessed testimonials being given include:
Vitamin supplement
The quality and reputation of most vitamin supplements being offered by different companies have led to the provision of testimonials by various consumers and clients of such products. For instance, the suitability of a particular vitamin supplement makes its consumers persuade other people to purchase and have a test of the quality of the product. This occurs due to the nature of regulation in the vitamin supplement market.
Vehicle repairs
Many vehicle repairs experts offer the best possible services to their clients without necessarily overcharging them for insufficient services provided. Rendering better service to the consumers at relatively fair prices makes most of them gain reputation which makes other car owners yearn of utilizing their famous services.
Education
Even though there are many scholars with higher levels of education, it is very to assess the quality of education that an individual acquired. Testimonials have often been given by other people about the inventions or quality articles written by different scholars. The quality of their academic work thus earns them reputations.
A backpack
A backpack is an investment that leads to the production of human capital. By investing in a backpack, an individual accrues quality education which could generate future returns on the invested sum.
Attending religious service
When an individual attends a religious service, there are some forms of spiritual investments. In this manner, the religious capital is produced.
Fort building out of chairs and blanket
The construction of a fort using chairs and blankets is neither capital nor an investment since there are neither interests anticipated nor future returns expected. Such a construction forms the basis for producing social capital.
2000 dollars
2000 dollars is capital since it can be used to acquire fixed assets or reserved to generate interests. Provided the amount of money is not used to settle business expenses but directed towards producing more revenues through accruing interests.
Knowledge held on the economic manner of thinking
This is an investment that can be categorized under human capital. The knowledge held by an individual form the foundation for the production of human capital.
Capital goods used in the production of final exams include:
- Stationeries like pencils, pen, paper, ink, and rubber. They are physical capital.
- Textbooks are also physical capital goods.
- Processors such as printers or laptops are capital goods. They are physical capital.
- Tutors or teachers are capital goods that constitute human capital.
- Computer hardware and software are capital goods classified under physical capital.
References
Alger, Ingela, and Francois Salanie. “A Theory of Fraud and Over-Consumption in Experts Markets.” Journal of Economics and Management Strategy 15.4. (2006): 853-881.
Baksi, Soham, and Pinaki Bosi. “Credence Goods, Efficient Labeling Policies, and Regulatory Enforcement.” Environmental and Resource Economics 37.2(2007): 411-430.