Information Transmission in Monopolistic Credence Goods Markets

15:30-17:00, Friday, June 9, 2023

Tencent Meeting（Meeting ID：430 202 558）

Dr. Xiaoxiao Hu is now a Visiting Assistant Professor in the Faculty of Business and Economics at University of Hong Kong. She earned her Ph.D. in Economics from Hong Kong University of Science and Technology in 2019. Subsequently, she has served as an Assistant Professor at Wuhan University. Her research interests include industrial organization and repeated games. She has her paper published in Journal of Industrial Economics.

We study a general credence goods model with N problem types and N treatments. Communication between the expert seller and the client is modeled as cheap talk. We find that the expert's equilibrium payoffs admit a geometric characterization, described by the quasiconcave envelope of his belief-based profits function under discriminatory pricing. We establish the existence of client-worst equilibria, apply the geometric characterization to previous research on credence goods, and provide a necessary and sufficient condition for when communication benefits the expert. For the binary case, we solve for all equilibria and characterize client's possible welfare among all equilibria.

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