Lemons Models of Professional Labor Markets Reconsidered
This paper examines the nature of equilibrium in professional service markets where consumers are heterogeneous and practitioners are quality-differentiated. The paper first develops models for the cases in which consumers can and cannot observe the quality of any practitioner. Noting that unobservable quality is a likely characteristic of professional labor markets, the paper then compares the equilibrium outcomes in a pure lemons model with those under symmetric information. The existence of adverse selection in the equilibrium is shown to depend both on the demand structure as well as the supply structure. It is also observed that conventional lemons models are not consistent with characteristics of the professional service markets. Finally, the paper argues that the standard theory which views occupational licensure as a solution to the adverse selection problem loses much of its validity in the long run.
Volume (Year): 22 (1996)
Issue (Month): 3 (Summer)
|Contact details of provider:|| Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA|
Phone: (201) 684-7346
Web page: https://www.quinnipiac.edu/eea/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:22:y:1996:i:3:p:355-363. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson, College of the Holy Cross)
If references are entirely missing, you can add them using this form.