COMPUTATIONAL SOCIAL SCIENCE WORKSHOP
Abstract: To overcome information asymmetries and the potential for adverse selection, consumers in markets for expert services often rely on referrals by third parties. Prior work suggests that these third parties leverage their experience and knowledge about the services offered by providers to improve match quality between consumer needs and provider expertise. This explanation of how referrals create value does not account for the process by which third parties build their knowledge of the services offered in the market. We argue that in gauging the quality distribution of services offered, third parties and providers are likely to build embedded relationships which may motivate providers to increase their effort and third parties to endorse the provider. These two mechanisms provide alternative pathways by which referrals can create value for consumers. We examine these arguments in the context of referrals of patients by primary care physicians (PCPs) to medical specialists. We show that patients have more confidence in the recommendations of the specialist if the PCP and specialist have built a strong relationship. Analyses suggest that this difference cannot be explained by better match quality or increased effort by the specialist. The results are most consistent with PCPs endorsing the services of providers that they have a strong relationship with. These findings suggest that strong referral relationships in markets for expert advice may mitigate endemic uncertainties about quality and the perceived risk of opportunism faced by consumers.
Mathijs de Vaan is an Assistant Professor at the Haas School of Business, University of California-Berkeley and earned his PhD in Sociology at Columbia University. His research examines how people and organizations navigate economic exchange when there is uncertainty about the quality of the product or service that is provided. For example, how is CEO compensation set when it is unclear how much the CEO contributes to firm performance? Or how do we allocate research funding when there is disagreement about the quality of research proposals? And how do physicians decide when to prescribe opioids when the benefit to the patient is not obvious? His research has been published in outlets including the American Sociological Review, the American Journal of Sociology, Proceedings of the National Academy of Sciences of the United States of America, and Management Science.
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This workshop is cosponsored by the Center for the Study of American Politics (CSAP) and the Yale School of Management (SOM) with support from the Initiative for Leadership and Organization at SOM.