Information availability and ability choice in a market for physicians

Edgardo Lara Córdova, Javier A. Rodríguez-Camacho

Research output: Contribution to journalArticlepeer-review

Abstract

We study the ability choices and pricing strategies of physicians in a duopolistic market where consumers base their decisions on anecdotes. The consumers are aware of only some of the physicians and estimate their abilities by taking a sample from the patients a physician has previously treated. In this setting, situations arise where physicians have incentives to choose a low level of ability even when it is costless. Namely, more information availability leads to more ability differentiation and a lower average level in equilibrium. Conversely, an equilibrium where both physicians choose a maximum ability is possible when information on at least one of the physicians is not readily available.

Original languageEnglish
Pages (from-to)245-267
Number of pages23
JournalMetroeconomica
Volume73
Issue number1
DOIs
StatePublished - Feb 2022

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