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The Economics of Advice

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  • Emons, Winand
  • Lenhard, Severin

Abstract

A consumer wants to buy one of three different products. An expert observes which of the three products is the best match for the consumer. Under linear prices a monopolistic expert may truthfully reveal, may partially reveal, and may not reveal at all her information. The outcome is inefficient; moreover, the consumer gets some of the surplus. With a two-part tariff the expert truthfully reveals her information. The outcome is efficient and the expert appropriates the entire surplus. If experts are competitive, they also truthfully reveal; here all the surplus goes to consumers.

Suggested Citation

  • Emons, Winand & Lenhard, Severin, 2023. "The Economics of Advice," CEPR Discussion Papers 17840, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17840
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    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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