EXPERTS AND THEIR RECORDS
Venue
Economic Inquiry (2013) (to appear)
Publication Year
2013
Authors
Michael Schwarz, Alex Frankel
BibTeX
Abstract
A market where short-lived customers interact with long-lived experts is
considered. Experts privately observe which treatment best serves a customer, but
are free to choose more or less profitable treatments. Customers only observe
records of experts' past actions. If experts are homogeneous there exists an
equilibrium where experts always choose the customer's preferred treatment (play
truthfully). Experts are incentivized with the promise of future business: new
customers tend to choose experts who performed less profitable treatments in the
past. If expert payoffs are private information, experts can never always be
truthful. But sufficiently patient experts may be truthful almost always.
