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Reputation on a credence good market: an economic analysis of professional self-regulation

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  • Camille Chaserant
  • Sophie Harnay
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    Abstract

    This article provides a rationalization of (at least partial) professional self-regulation resting on the joint production of individual and collective reputations and its impact on the quality of professional services. It presents a short model that aims to show that (i) a high-quality steady-state exists in a market for a credence goods and that (ii) the likelihood of high quality increases when the market is self-regulated by the profession in comparison to the situation where there is no self-regulation. The law and economics literature usually criticizes self-regulation as a modern form of corporatism; we show that it may help to regulate quality when clients are faced with opportunistic professionals.

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    File URL: http://economix.fr/pdf/dt/2011/WP_EcoX_2011-32.pdf
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    Bibliographic Info

    Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2011-32.

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    Length: 8 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:drm:wpaper:2011-32

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    Related research

    Keywords: professional services; credence goods; self-regulation; individual reputation; collective reputation;

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    References

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    1. W. Bentley MacLeod, 2007. "Reputations, Relationships, and Contract Enforcement," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 595-628, September.
    2. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 16(1), pages 67-88, April.
    3. Van Den Bergh, Roger & Faure, Michael, 1991. "Self-regulation of the professions in Belgium," International Review of Law and Economics, Elsevier, Elsevier, vol. 11(2), pages 165-182, September.
    4. Thomas Gehrig & Peter-J. Jost, 1993. "Quacks, Lemons, and Self-Regulation: A Welfare Analysis," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1057, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    Cited by:
    1. Bendikov, Mikhail & Kolesnik, Georgiy, 2013. "Конкуренция Саморегулируемых Организаций И Эффективность Рынков
      [Self-regulatory organizations competition and the market efficiency]
      ," MPRA Paper 47812, University Library of Munich, Germany.

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