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Information Acquisition, Referral, and Organization

Author

Listed:
  • Simona Grassi

    (Universite de Lausanne)

  • Ching-To Albert Ma

    (Boston University)

Abstract

Each of two experts may provide a service to a client. Experts' cost comparative advantage depends on an unknown state, but an expert may exert effort to get a private signal about it. In a market, an expert may refer the client to the other for a fee. In equilibrium, only one expert exerts e§ort and refers, and the equilibrium allocation is ine¢ cient. Referral efficiency can be restored when experts form an organization, in which a referring expert must bear the referred expert's cost. However, the referred expert shirks from work effort because of the lack of cost responsibility.

Suggested Citation

  • Simona Grassi & Ching-To Albert Ma, 2015. "Information Acquisition, Referral, and Organization," Boston University - Department of Economics - Working Papers Series wp2015-007, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2015-007
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    Cited by:

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    3. Griebenow, Malte & Kifmann, Mathias, 2021. "Diagnostics and treatment: On the division of labor between primary care physicians and specialists," hche Research Papers 25, University of Hamburg, Hamburg Center for Health Economics (hche).
    4. Liu, Ting & Albert Ma, Ching-to & Mak, Henry Y., 2018. "Incentives for motivated experts in a partnership," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 296-313.
    5. Fridgen, Gilbert & Keller, Robert & Thimmel, Markus & Wederhake, Lars, 2017. "Shifting load through space–The economics of spatial demand side management using distributed data centers," Energy Policy, Elsevier, vol. 109(C), pages 400-413.
    6. Unger, Elizabeth A. & Ulfarsson, Gudmundur F. & Gardarsson, Sigurdur M. & Matthiasson, Thorolfur, 2018. "The effect of wind energy production on cross-border electricity pricing: The case of western Denmark in the Nord Pool market," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 121-130.
    7. Kirschstein, Thomas, 2018. "Planning of multi-product pipelines by economic lot scheduling models," European Journal of Operational Research, Elsevier, vol. 264(1), pages 327-339.
    8. Mehmet Ekmekci & Nenad Kos, 2020. "Signaling Covertly Acquired Information," Working Papers 658, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    9. Lange, Juliane & Stahl, Florian & Vossen, Gottfried, 2016. "Datenmarktplätze in verschiedenen Forschungsdisziplinen: Eine Übersicht," Arbeitsberichte des Instituts für Wirtschaftsinformatik 138, University of Münster, Department of Information Systems.
    10. Ekmekci, Mehmet & Kos, Nenad, 2023. "Signaling covertly acquired information," Journal of Economic Theory, Elsevier, vol. 214(C).
    11. In-Koo Cho, 2023. "Signaling games with endogenous types," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(1), pages 157-174, March.

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    More about this item

    Keywords

    information acquisition; referral; organization; adverse selection; cost-reduction incentive;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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