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Becoming a bad doctor

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  • Szech, Nora

Abstract

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.

Suggested Citation

  • Szech, Nora, 2011. "Becoming a bad doctor," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 244-257.
    • Handle: RePEc:eee:jeborg:v:80:y:2011:i:1:p:244-257
    DOI: 10.1016/j.jebo.2011.03.010
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    References listed on IDEAS

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    1. Ariel Rubinstein & Ran Spiegler, 2008. "Money Pumps in the Market," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 237-253, March.
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    6. Glenn Ellison & Drew Fudenberg, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 93-125.
    7. Ran Spiegler, 2006. "The Market for Quacks," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1113-1131.
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    More about this item

    Keywords

    Bounded rationality; S(1) procedure; Product differentiation; Price dispersion;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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