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

David Bardey, Denis Gromb, David Martimort, JJrrme Pouyet
2016 Social Science Research Network  
We consider a market in which sellers can exert an informationgathering 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
more » ... quality of advice is more difficult when sellers have private information on the profitability of the goods.
doi:10.2139/ssrn.2877214 fatcat:uwunohu3dzct7f6norx4rf45ri