Equilibrium information in credence goods

B-Tier
Journal: Games and Economic Behavior
Year: 2024
Volume: 145
Issue: C
Pages: 84-101

Authors (2)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We study credence goods in a general model. A consumer may suffer a loss which is a continuous random variable. Privately observing the loss value, an expert can provide a repair at a price to eliminate the consumer's loss. All perfect-Bayesian equilibria are inefficient, in that some losses are not repaired. In closed form, we derive a pooling equilibrium (where losses are inferred to be in an interval), and a separating equilibrium (where losses are precisely inferred). If the expert can acquire an information structure on losses, the first best is achieved by a binary signal. Results are robust when cost and loss are random and correlated, and when there are multiple experts.

Technical Details

RePEc Handle
repec:eee:gamebe:v:145:y:2024:i:c:p:84-101
Journal Field
Theory
Author Count
2
Added to Database
2026-01-25