Chapter 3 provides another possible explanation for the gated structure of some professional service industries. Such an industry structure might help to alleviate adverse selection problems between parties that interact infrequently. Intermediaries aggregate many short-run transactions between various consumers and a particular producer. As such, they might be able to learn a producer's level of proficiency more rapidly than an individual consumer. However, the presence of a positive information externality means that too few consumers will seek a referral. As such, some form of regulation to encourage consumers to seek a referral might be warranted.In particular, it does not provide an explanation for the existence of many economic and social institutions. The failure of the Arrow-Debreu-McKenzie model to explain the existence of institutions provides the motivation for the topics addressedanbsp;...
|Title||:||Essays in Microeconomic Theory|
|Author||:||Damien Sean Eldridge|
|Publisher||:||ProQuest - 2007|