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Practices (revised)

Author

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  • Max Blouin
  • Jean-Marc Bourgeon

Abstract

We examine an economy where professionals provide services to clients and where a professional can sell his practice to another. Professionals vary in quality, and clients in their need (or willingness-to-pay) for high-quality service. Efficiency is measured as the number of matches between high-quality professionals and high-need clients. However, agent types are unobservable a priori. We find that trade in practices can facilitate the transmission of information about agent types. In general full efficiency is achieved, but equilibrium is not always robust to random shocks. A tax on the sale of practices ensures the existence of robust, efficient equilibria.

Suggested Citation

  • Max Blouin & Jean-Marc Bourgeon, 2008. "Practices (revised)," Cahiers de recherche 0805, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0805
    as

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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2008/CIRPEE08-05.pdf
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    References listed on IDEAS

    as
    1. Steven Tadelis, 1999. "What's in a Name? Reputation as a Tradeable Asset," American Economic Review, American Economic Association, vol. 89(3), pages 548-563, June.
    2. George J. Mailath & Larry Samuelson, 2001. "Who Wants a Good Reputation?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 415-441.
    3. Luis Garicano & Tano Santos, 2004. "Referrals," American Economic Review, American Economic Association, vol. 94(3), pages 499-525, June.
    4. Hendrik Hakenes & Martin Peitz, 2007. "Observable Reputation Trading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 693-730, May.
    5. Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
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    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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