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Becoming a bad doctor

  • Szech, Nora
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    We analyze a market with n rational firms (doctors) and a continuum of boundedly rational consumers (patients). Following Spiegler (2006a), we assume that patients are not familiar with the market and rely on anecdotes. We analyze the price setting game played by doctors with given, different healing qualities. Doctors know their own quality, as well as the qualities of their competitors. In the unique equilibrium all doctors, no matter how bad, earn positive profits.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167268111000965
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 80 (2011)
    Issue (Month): 1 ()
    Pages: 244-257

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    Handle: RePEc:eee:jeborg:v:80:y:2011:i:1:p:244-257
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    1. Ariel Rubinstein & Rani Spiegler, 2005. "Money Pumps in the Market," Levine's Bibliography 122247000000000941, UCLA Department of Economics.
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    4. Rani Spiegler, 2005. "The Market for Quacks," Levine's Bibliography 784828000000000634, UCLA Department of Economics.
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    8. Ellison, Glenn & Fudenberg, Drew, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 93-125, February.
    9. Spiegler, Ran, 2010. ""But Can't we Get the Same Thing with a Standard Model?" Rationalizing Bounded-Rationality Models," MPRA Paper 21428, University Library of Munich, Germany.
    10. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    11. Ran Spiegler, 2005. "Competition over Agents with Boundedly Rational Expectations," Levine's Bibliography 122247000000000535, UCLA Department of Economics.
    12. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
    13. McAfee R. Preston, 1994. "Endogenous Availability, Cartels, and Merger in an Equilibrium Price Dispersion," Journal of Economic Theory, Elsevier, vol. 62(1), pages 24-47, February.
    14. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
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