With credence goods consumers cannot judge actual quality neither before purchase - ex ante - nor after purchase - ex post -. Trust has to replace own examination and verification. Applying Choquet-Expected Utility theory, a general model of credence goods is developed which takes the problem of...

This work takes a closer look on the predominant assumption in usual lemon market models of having finitely many or even only two different levels of quality. We model a situation which is close to the classical monopolistic setting but admits an interval of possible quality values....

Riley (1979)'s reactive equilibrium concept addresses problems of equilibrium existence in competitive markets with adverse selection. The game-theoretic interpretation of the reactive equilibrium concept in Engers and Fernandez (1987) yields the Rothschild-Stiglitz (1976)/Riley (1979)...

This paper proposes a model for a certification market with an imperfect testing technology. Such a technology only assures that whenever two products are tested the higher quality product is more likely to pass than the lower quality one. When only one certifier with such testing technology is...

I analyse a market with asymmetric information, interdependent values and trade frictions. The frictions can be reduced at a cost, e.g. by increasing attention, search, lobbying or computing power. For some parameters, there is a unique equilibrium in which an increase in the gains from trade...

We show that contracting in agency with voluntary participation may involve incentives for the agent's abstention. Their provision alters the optimality criteria in the principal's decision-making, further distorts the mechanism, and may lead to breakdown of contracting in circumstances where...

Many service industries, including the medical and legal professions in some countries, display a gated structure. Rather than approaching a final producer directly, a consumer will first seek a referral from an intermediary. In this paper, we provide one possible explanation for such an...

Many service industries, including the medical and legal professions in some countries, display a gated structure. Rather than approaching a final producer directly, a consumer will first seek a referral from an intermediary. Such an industry structure might help to alleviate adverse selection...

Spence's theory of signaling shows that, in job markets, signals could resolve adverse selection. However, Spence also mentions the existence of indices. Although Spence does not believe that indices themselves play any roles in resolving adverse selection, this paper shows that if the costs of...

We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders' independent signals. The optimal mechanism exhibits either neutral selection, wherein the object is randomly allocated at a price that all bidders are...