Consumer information and providers' reputations. An empirical test in the market for psychotherapy

This paper estimates the price effects of provider-specific reputations measured as the percent of each provider's clients who are referred by 'informed community sources', such as other health professionals, school counselors, businesses, clergy, and attorneys. Using data on the prices of outpatient psychotherapy visits to private-practice social workers in Massachusetts, the results suggest that social workers with established reputations for high-quality care charge higher prices. In addition, the results suggest that intra- and inter-professional competition can constrain the pricing decisions of psychotherapists, and that increasing consumer information increases the effectiveness of this competition.