Controlling Sellers Who Provide Advice: Regulation and Competition

David Bardey, Denis Gromb, David Martimort and Jerome Pouyet

Journal of Industrial Economics, 2020, vol. 68, issue 3, 409-444

Abstract: A monopoly seller advising buyers about which of two goods fits their needs may be tempted to recommend the higher margin good. For the seller to collect information about a buyer’s needs and provide truthful advice, the profits from selling both goods must be similar enough, i.e., within an implementability cone. The optimal regulation controls pricing distortions and information‐collection incentives separately via price regulation and fixed rewards respectively. This no longer holds when the seller has private information about costs as both problems interact. We study whether competition and the threat by buyers to switch sellers can substitute for regulation.

Date: 2020
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Citations: View citations in EconPapers (11)

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https://doi.org/10.1111/joie.12228

Related works:
Working Paper: Controlling Sellers Who Provide Advice: Regulation and Competition* (2020)
Working Paper: Controlling Sellers Who Provide Advice: Regulation and Competition* (2020)
Working Paper: Controlling Sellers Who Provide Advice: Regulation and Competition (2019)
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