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Regulation of Charlatans in High‐Skill Professions

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  • JONATHAN B. BERK
  • JULES H. VAN BINSBERGEN

Abstract

We model a market for a skill in short supply and high demand, where the presence of charlatans (professionals who sell a service they do not deliver on) is an equilibrium outcome. In the model, reducing the number of charlatans through regulation lowers consumer surplus because of the resulting reduction in competition among producers. Producers can benefit from this reduction, potentially explaining the regulation we observe. The effect on total surplus depends on the type of regulation. We derive the factors that drive the cross‐sectional variation in charlatans (regulation) across professions.

Suggested Citation

  • Jonathan B. Berk & Jules H. Van Binsbergen, 2022. "Regulation of Charlatans in High‐Skill Professions," Journal of Finance, American Finance Association, vol. 77(2), pages 1219-1258, April.
    • Handle: RePEc:bla:jfinan:v:77:y:2022:i:2:p:1219-1258
    DOI: 10.1111/jofi.13112
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    References listed on IDEAS

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    2. Daniel Garrett & Ivan T. Ivanov, 2023. "Gas Guns and Governments: Financial Costs of Anti-ESG Policies," Working Paper Series WP 2023-07, Federal Reserve Bank of Chicago.

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