Markets for professional services: queues and mediocrity
We analyze a dynamic, decentralized market with endogenous entry, where in each period the active professionals supply one unit of an indivisible service at varying degrees of quality. The customers that have entered the market are randomly matched with the active professionals and prices are set by (complete information) pair-wise bargaining. In its unique steady state, the market leads to an excess diversity of quality and customers may have to suffer costly delays. Notably, efficiency is not regained as per period delay costs disappear. We also show that a professional college setting licensing rules will improve welfare (and even Consumer Surplus), relative to the free market, whenever the inefficiency is caused by a large enough excess supply.
|Date of creation:||13 May 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.econ.ed.ac.uk/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gale, Douglas, 1987.
"Limit theorems for markets with sequential bargaining,"
Journal of Economic Theory,
Elsevier, vol. 43(1), pages 20-54, October.
- Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
- Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
- Shirley Svorny, 2004. "Licensing Doctors: Do Economists Agree?," Econ Journal Watch, Econ Journal Watch, vol. 1(2), pages 279-305, August.
- JÕzsef SÂkovics & Clara PonsatÎ, 1998. "Rubinstein bargaining with two-sided outside options," Economic Theory, Springer, vol. 11(3), pages 667-672.
- Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- Rachel E. Kranton, 2003. "Competition and the Incentive to Produce High Quality," Economica, London School of Economics and Political Science, vol. 70(279), pages 385-404, 08.
- repec:bla:restud:v:53:y:1986:i:5:p:843-62 is not listed on IDEAS
- Max R. Blouin, 2003. "Equilibrium in a decentralized market with adverse selection," Economic Theory, Springer, vol. 22(2), pages 245-262, 09.
- Bester, Helmut, 1993. "Bargaining versus Price Competition in Markets with Quality Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 278-88, March.
- Morris M. Kleiner, 2000. "Occupational Licensing," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 189-202, Fall.
- Stiglitz, J E, 1979. "Equilibrium in Product Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 69(2), pages 339-45, May.
- Max Blouin, 2001. "Equilibrium in a Decentralized Market with Adverse Selection," Cahiers de recherche CREFE / CREFE Working Papers 128, CREFE, Université du Québec à Montréal, revised Mar 2001.
- Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
- Wilson, Charles A, 1979. "Equilibrium and Adverse Selection," American Economic Review, American Economic Association, vol. 69(2), pages 313-17, May.
- Charles Wilson, 1980. "The Nature of Equilibrium in Markets with Adverse Selection," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 108-130, Spring.
- Bester,Helmut, 1986.
"Bargaining,Search costs and equilibrium price distribution,"
Discussion Paper Serie A
49, University of Bonn, Germany.
When requesting a correction, please mention this item's handle: RePEc:edn:esedps:133. 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: (Gina Reddie)
If references are entirely missing, you can add them using this form.