The market provision of management services, information asymmetries and service quality - Some market solutions: An empirical example

Publication Type

Journal Article

Publication Date

12-1993

Abstract

This article examines the problems of information asymmetry associated with the market provision of managerial services. Such problems are heightened by those characteristics which differentiate services from goods. Two unique, and central, characteristics of services, are intangibility and perishability. These create special problems for the market provision of services. In particular they make for difficulties in assessing quality; whereas the producer may know product quality, the buyer often does not. The asymmetry between sellers and buyers is of two types: Adverse selection and moral hazard. Adverse selection occurs when the buyer cannot observe the relevant characteristics of the seller or the conditions under which they work. The problem of moral hazard is the buyer's inability to observe the action taken by the sellers. If these difficulties are not overcome, the market could collapse as companies withdraw and internalize service provision. However, each market has a number of in-built mechanisms which remedy the harmful effects associated with information-related problems. The institutional arrangements which predominate in particular markets are dependent upon the trust-producing mechanisms within those markets. Consequently, market responses to information asymmetries are far from uniform. The argument is illustrated using the example of the executive recruitment industry. In this respect the paper is a highly focused study of those mechanisms which overcome information asymmetries in one service market.

Keywords

Employee recruitment, quality of service, management services

Discipline

Human Resources Management | Organizational Behavior and Theory

Research Areas

Organisational Behaviour and Human Resources

Publication

British Journal of Management

Volume

4

Issue

4

First Page

235

Last Page

251

ISSN

1045-3172

Identifier

10.1111/j.1467-8551.1993.tb00061.x

Publisher

Wiley: 24 months

Comments

Reprinted in Avakian, S. & Clark, T. (eds.). (2012). Management consultants. Edward Elgar Publishing

Additional URL

https://doi.org/10.1111/j.1467-8551.1993.tb00061.x

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