Search and Competition in Expert Markets
Published online on March 25, 2026
Abstract
["The RAND Journal of Economics, Volume 57, Issue 1, Page 158-175, Spring 2026. ", "\nABSTRACT\nWe analyze a model where consumers sequentially search experts for treatment recommendations and prices, facing either zero or a positive search cost, whereas experts simultaneously compete in these two dimensions. In equilibrium, experts may “cheat” by overstating the severity of a consumer's problem and recommending an unnecessary treatment, prices follow distributions depending on the problem type and the treatment, and consumers employ Bayesian belief updating about their problem types during search. Paradoxically, as search cost decreases, expert cheating and prices can both increase stochastically. However, if search cost is sufficiently small, competition will force all experts to behave honestly."]