Using Customer Service to Build Clients’ Trust*

Abstract

It is well known in the credence-good literature that in an expert-client relationship, under the Liability assumptions, clients have to reject the expert’s serious-treatment recommendations with a positive probability to ensure that the expert honestly recommends treatments. Inefficiency arises because some socially efficient treatments are not provided. We show that the expert can enhance clients’ trust, or acceptance rate of the serious treatment, by providing intrinsically socially inefficient customer service upon recommending the serious treatment. Enhanced clients’ trust leads to higher efficiency and higher profit for the expert. However, trust cannot be enhanced by providing customer service with different timing.