Trust Building in Credence Goods Markets

• 成果类型: Article
• 署名作者: Fong, Yuk-fai; Liu, Ting; Meng, Xiaoxuan
• 署名单位: University of Hong Kong; State University of New York (SUNY) System; Stony Brook University; State University of New York (SUNY) System; Stony Brook University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20180313
• 发表日期: 2022
• 页码: 490-528
• 关键词: price-competition; repeated games; reputation; experts; ECONOMICS; Verifiability; INFORMATION; liability; FRAUD

摘要

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.