蝌蚪网 Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Trust Building in Credence Goods Markets
蝌蚪网 Journal: Microeconomics
(pp. 490–528)
Abstract
We study trust building in credence-goods markets in a dynamic setting. When consumers' expected loss is low and it is efficient to fix only the more severe problem, there is no trade in the one-shot game. In the repeated game, an expert's honesty is monitored through consumers' rejection of his recommendations. The expert's profit in the optimal equilibrium weakly increases in the discount factor but does not achieve the first best, which contrasts sharply with the optimal equilibrium in experience-goods markets. The optimal equilibrium involves undertreatment if the expert is sufficiently patient, and overtreatment if he is moderately patient.Citation
Fong, Yuk-Fai, Ting Liu, and Xiaoxuan Meng. 2022. "Trust Building in Credence Goods Markets." 蝌蚪网 Journal: Microeconomics 14 (1): 490–528. DOI: 10.1257/mic.20180313Additional Materials
JEL Classification
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification