Different assumptions about information availability, market structure, and agency costs can yield different expected outcomes in otherwise similar situations.

Economists use the term "credence goods(Links to an external site.)" to describe goods that we buy based on our faith in what the sellers and others tell us, rather than based on our own tastes and understanding of what we are really getting.

One example of a credence good would be a medical procedure that we do not really understand, but that we trust is being recommended to us in good faith by a health care provider. Similar situations may arise with services such as car repair, plumbing services, education, dietary supplements, etc., as long as we are relying on the word of sellers rather than our own understanding.

What is the importance of trust and reputation in markets for credence goods. Provide examples of different kinds of situations with different kinds of outcomes based on trust and reputation of sellers.