Work

Search and Competition in Expert Markets

Year: 2026

Type: article

Abstract: ABSTRACT We analyze a model where consumers sequentially search experts for treatment recommendations and prices, facing either zero or a positive search cost, whereas experts simultaneously compete in these two dimensions. In equilibrium, experts may “cheat” by overstating the severity of a consumer's problem and recommending an unnecessary treatment, prices follow distributions depending on the problem type and the treatment, and consumers employ Bayesian belief updating about their problem types during search. Paradoxically, as search cost decreases, expert cheating and prices can both increase stochastically. However, if search cost is sufficiently small, competition will force all experts to behave honestly.

Source: The RAND Journal of Economics

DOI: 10.1111/1756-2171.70049

Authors: Yiran Cao, Yongmin Chen, Yucheng Ding, Tianle Zhang

Institutions: Jinan University, University of Colorado Boulder, Wuhan University, Lingnan University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,400

Funder: National Natural Science Foundation of China