Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice

Pre-print, Working paper: We consider a market in which sellers can exert an information-gathering effort to advise buyers about which of two goods best fits their needs. Sellers may steer buyers towards the higher margin good. We show that for sellers to collect and reveal information, profits on both goods must be sufficiently close to each other, i.e., lie within an implementability cone, which competition or regulation may ensure. Instruments to do so vary with the context. Controlling market power while improving the quality of advice is more difficult when sellers have private information on the profitability of the goods.

Author(s)

David Bardey, Denis Gromb, David Martimort, Jérôme Pouyet

Date of publication
  • 2016
Keywords JEL
D82 G24 I11 L13 L15 L51
Keywords
  • Mis-Selling
  • Expertise
  • Retailing
  • Competition
  • Regulation
  • Asymmetric Information Keywords Mis-Selling
  • Asym- metric Information
Internal reference
  • PSE Working Papers n°2016-26
Version
  • 1