Reputation on a credence good market: an economic analysis of professional self-regulation
AbstractThis 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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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2011-32.
Length: 8 pages
Date of creation: 2011
Date of revision:
professional services; credence goods; self-regulation; individual reputation; collective reputation;
Find related papers by JEL classification:
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-28 (All new papers)
- NEP-COM-2011-11-28 (Industrial Competition)
- NEP-LAW-2011-11-28 (Law & Economics)
- NEP-REG-2011-11-28 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Van Den Bergh, Roger & Faure, Michael, 1991. "Self-regulation of the professions in Belgium," International Review of Law and Economics, Elsevier, vol. 11(2), pages 165-182, September.
- W. Bentley MacLeod, 2007. "Reputations, Relationships, and Contract Enforcement," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 595-628, September.
- Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
- Thomas Gehrig & Peter-J. Jost, 1993.
"Quacks, Lemons, and Self-Regulation: A Welfare Analysis,"
1057, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Gehrig, Thomas & Jost, Peter-J, 1995. "Quacks, Lemons, and Self Regulation: A Welfare Analysis," Journal of Regulatory Economics, Springer, vol. 7(3), pages 309-25, May.
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