This paper develops a model of expert-customer interaction in which the expert has a diagnostic advantage and can both recommend and implement a treatment. We assume liability, in the sense that experts are committed to solving the customer’s problem, but rule out ex-post verifiability: customers cannot observe the type of treatment actually provided. The analysis incorporates customers’ aversion to disadvantageous inequality, experts’ lying costs, and potential diagnostic error. The model characterizes the equilibrium frequency with which experts misrepresent minor problems as severe and charge high prices. We then design an original laboratory experiment to test the model’s predictions. When facing a minor problem, about one third of experts honestly report it and charge the low price associated with the low-cost treatment, whereas 60% misrepresent the problem as severe and charge a high price. On average, these dishonest experts capture approximately 61% of the total surplus in accepted deals. The analysis shows that diagnostic error affects posted prices, but not the equilibrium frequency of lying. We also analyze the determinants of customers’ acceptance decisions.