Credence Goods Markets with Conscientious and Selfish Experts

Ting Liu ()

MPRA Paper from University Library of Munich, Germany

Abstract: I study credence goods markets when there are both selfish and conscientious experts. The selfish expert is a profit maximizer. The conscientious expert wants to maximize profit and repair the consumer's problem. There are two classes of equilibria: uniform-price equilibria and nonuniform-price equilibria. A consumer cannot infer the expert's type from his price list in a uniform-price equilibrium but can do that in a nonuniform-price equilibrium. When the fraction of the conscientious expert is small, the selfish expert will be honest about the severity of the consumer's problem. When the fraction of the conscientious expert is large, the selfish expert will cheat the consumer; overcharging the consumer whenever he offers to repair the problem. Finally, more conscientious experts may result in a larger social loss. When the fraction of the conscientious expert is close to one of the two extremes, 0 and 1, more conscientious experts will result in smaller social loss. When the fraction of the conscientious expert is in a middle range, more conscientious experts may result in a larger social loss.

Keywords: credence goods markets; conscientious experts; selfish experts; social loss (search for similar items in EconPapers)
JEL-codes: L12 L15 (search for similar items in EconPapers)
Date: 2006-12-08, Revised 0007-09-10
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Related works:
Journal Article: CREDENCE GOODS MARKETS WITH CONSCIENTIOUS AND SELFISH EXPERTS (2011)
Working Paper: Credence Goods Markets with Conscientious and Selfish Experts (2006)
Working Paper: Credence Goods Markets with Conscientious and Selfish Experts (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1107

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