Activity: Talks or Presentations › Other Invited Talks or Presentations
Description
We develop a model in which consumers sequentially search experts for recommendations and prices to treat a problem, and experts simultaneously compete in these two dimensions. Consumers have either zero or a positive search cost. In equilibrium, experts may "cheat" by recommending an unnecessary treatment with positive probabilities, prices follow distributions that depend on a consumer's problem type and the treatment, and consumers search with Bayesian belief updating about their problem types. Remarkably, as search cost decreases, both expert cheating and prices can increase stochastically. However, if search cost is sufficiently small, competition will force all experts to behave honestly.
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