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Saints and Markets: Activists and the Supply of Credence Goods
Author(s) -
Feddersen Timothy J.,
Gilligan Thomas W.
Publication year - 2001
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2001.00149.x
Subject(s) - credence good , credence , microeconomics , consumption (sociology) , collective action , action (physics) , welfare , economics , private information retrieval , social welfare , public economics , consumer welfare , complete information , business , information asymmetry , industrial organization , market economy , political science , social science , statistics , physics , mathematics , quantum mechanics , sociology , politics , law
This paper contains a theoretical exploration of the potential effects of an information‐supplying activist on a market for credence goods. Using a non‐cooperative game‐theoretic model with incomplete information, we find that such an activist can alter the decisions of firms and consumers and enhance the social welfare of market exchange. We also find that an activist can support equilibria in which firms differentiate their products on some credence characteristic even though this characteristic remains unknown to the consumer both prior and subsequent to consumption. In general, our analysis has several implications for the study of private collective action in markets.