Controlling Sellers Who Provide Advice: Regulation and Competition

Jerome Pouyet, David Martimort, Denis Gromb and David Bardey

No 13543, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A monopoly seller advises buyers about which of two goods best fits their needs but may be tempted to steer buyers towards 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 lie within an implementability cone. In the optimal regulation, pricing distortions and information-collection incentives are controlled separately by price regulation and fixed rewards respectively. This no longer holds when the seller has private information about costs as both problems interact. We study the extent to which competition and the threat by buyers to switch sellers can substitute for regulation.

Keywords: Mis-selling; Expertise; Regulation; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 G24 I11 L13 L15 L51 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-reg
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Related works:
Journal Article: 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* (2020)
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