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Saints and Markets: Activists and the Supply of Credence Goods

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  • Timothy J. Feddersen
  • Thomas W. Gilligan

Abstract

This paper contains a theoretical exploration of the potential effects of an information‐supplying activist on a market for credence goods. Using a non‐cooperative game‐theoretic model with incomplete information, we find that such an activist can alter the decisions of firms and consumers and enhance the social welfare of market exchange. We also find that an activist can support equilibria in which firms differentiate their products on some credence characteristic even though this characteristic remains unknown to the consumer both prior and subsequent to consumption. In general, our analysis has several implications for the study of private collective action in markets.

Suggested Citation

  • Timothy J. Feddersen & Thomas W. Gilligan, 2001. "Saints and Markets: Activists and the Supply of Credence Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 149-171, March.
  • Handle: RePEc:bla:jemstr:v:10:y:2001:i:1:p:149-171
    DOI: 10.1111/j.1430-9134.2001.00149.x
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    File URL: https://doi.org/10.1111/j.1430-9134.2001.00149.x
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    References listed on IDEAS

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    1. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
    2. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
    3. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
    4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, September.
    5. Pitchik, Carolyn & Schotter, Andrew, 1987. "Honesty in a Model of Strategic Information Transmission," American Economic Review, American Economic Association, vol. 77(5), pages 1032-1036, December.
    6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    7. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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