The market for quacks

• 成果类型: Article
• 署名作者: Spiegler, Ran
• 署名单位: Tel Aviv University
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1111/j.1467-937X.2006.00410.x
• 发表日期: 2006
• 页码: 1113-1131
• 关键词: mutual funds; equilibrium; INFORMATION

摘要

A group of n quacks plays a price-competition game, facing a continuum of patients who recover with probability alpha, whether they acquire a quack's treatment. If patients chose rationally, the market would be inactive. I assume, however, that patients choose according to a boundedly rational procedure, which reflects anecdotal reasoning. This element of bounded rationality has significant implications. The market for quacks is active, and patients suffer a welfare loss which behaves non-monotonically w.r.t. n and alpha. In an extended model that endogenizes the quacks' choice of treatments, the quacks minimize the force of price competition by offering maximally differentiated treatments. The patients' welfare loss is robust to market interventions, which would crowd out low-quality firms in standard models. Thus, as long as the patients' quality of reasoning is not lifted above the anecdotal level, ordinary competition policies may be ineffective.