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Credence Goods Markets With Conscientious And Selfish Experts

  • Ting Liu
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I study credence goods markets when there are both sel sh and conscientious experts. The selfish expert is a pro t maximizer. The conscientious expert wants to maximize pro t and repair the consumer's problem. There are two classes of equilibria: uniform-price equilibria and nonuniform-price equilibria. A consumer cannot infer the expert's type from his price list in a uniform-price equilibrium but can do that in a nonuniform-price equilibrium. When the fraction of the conscientious expert is small, the sel sh expert will be honest about the severity of the consumer's problem. When the fraction of the conscientious expert is large, the sel sh expert will cheat the consumer; overcharging the consumer whenever he o ers to repair the problem. Finally, more conscientious experts may result in a larger social loss.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 52 (2011)
Issue (Month): 1 (02)
Pages: 227-244

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Handle: RePEc:ier:iecrev:v:52:y:2011:i:1:p:227-244
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