Liu, Ting (2006): Credence Goods Markets with Conscientious and Selfish Experts.
Download (214kB) | Preview
I study credence goods markets when there are both selfish and conscientious experts. The selfish expert is a profit maximizer. The conscientious expert wants to maximize profit and repair the consumer's problem. There are two classes of equilibria: uniform-price equilibria and nonuniform-price equilibria. A consumer cannot infer the expert's type from his price list in a uniform-price equilibrium but can do that in a nonuniform-price equilibrium. When the fraction of the conscientious expert is small, the selfish expert will be honest about the severity of the consumer's problem. When the fraction of the conscientious expert is large, the selfish expert will cheat the consumer; overcharging the consumer whenever he offers to repair the problem. Finally, more conscientious experts may result in a larger social loss. When the fraction of the conscientious expert is close to one of the two extremes, 0 and 1, more conscientious experts will result in smaller social loss. When the fraction of the conscientious expert is in a middle range, more conscientious experts may result in a larger social loss.
|Item Type:||MPRA Paper|
|Original Title:||Credence Goods Markets with Conscientious and Selfish Experts|
|Keywords:||credence goods markets; conscientious experts; selfish experts; social loss|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L12 - Monopoly ; Monopolization Strategies
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms
|Depositing User:||Ting Liu|
|Date Deposited:||10 Dec 2006|
|Last Modified:||21 Jun 2016 13:42|
Alger, Ingela and Renault, Regis "Screening Ethics when Honest Agents Keep their Word", Economic Theory, forthcoming, published online, February 1, 2006.
Benabou, R. and Tirole, J. "Intrinsic and Extrinsic Motivation", Review of Economic Studies, 2003.
Darby, M.R. and Karni, E. "Free Competition and the Optimal Amount of Fraud", Journal of Law and Economics, 1973.
Dulleck, Uwe and Kerschbamer, Rudolf "On Doctors, Mechanics and Computer Specialists Or Where are the Problems with Credence Goods?", Journal of Economic Literature, 2006.
Emons, W. "Credence Goods and Fraudulent Experts", Rand Journal of Economics, 1997.
Emons, W. "Credence Goods Monopolists", International Journal of Industrial Organization, 2001.
Feddersen, Timothy J., and Gilligan, Thomas W., "Saints and Markets: Activists and the Supply of Credence Goods", Journal of Economics and Management Strategy, 2001.
Fehr, E. and Schmidt, K. M. "A Theory of Fairness, Competition, and Cooperation", Quarterly Journal of Economics, 1999.
Fong, Yuk-fai "When Do Experts Cheat and Whom Do They Target?", Rand Journal of Economics, 2005.
Lindbeck, A. and Weibull, J. W. "Altruism and Time Consistency: The Economics of Fait Accompli", Journal of Political Economy, 1988.
Pesendorfer, W. and Wolinsky, A. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice", Review of Economic Studies, 2003.
Pitchik, C. and Schotter, A. "Honesty in a Model of Strategic Information", American Economic Review, 1987.
Rabbin, M. "Incorporating Fairness into Game Theory and Economics", American Economic Review, 1993.
Wolinsky, A. "Competition in a Market for Informed Experts' Services", RAND Journal of Economics, 1993.