Discussion paper

DP17840 The Economics of Advice

A consumer wants to buy one of three different products. An expert observes which of the three products is the best match for the consumer. Under linear prices a monopolistic expert may truthfully reveal, may partially reveal, and may not reveal at all her information. The outcome is inefficient; moreover, the consumer gets some of the surplus. With a two-part tariff the expert truthfully reveals her information. The outcome is efficient and the expert appropriates the entire surplus. If experts are competitive, they also truthfully reveal; here all the surplus goes to consumers.

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Citation

Emons, W and S Lenhard (eds) (2023), “DP17840 The Economics of Advice”, CEPR Press Discussion Paper No. 17840. https://cepr.org/publications/dp17840