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We investigate a market in which experts have a moral hazard problem because they need to invest in costly but … unobservable effort to identify consumer problems. Experts have either high or low qualification and can invest either high or low … effort in their diagnosis. High skilled experts are able to identify problems with some probability even with low effort …
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We analyze competitions where the contestants evaluate each other and find the first contestant to be disadvantaged. We suspect that this is due to information diffusion, Bayesian belief updating taking place in course of the contest and initial uncertainty about a contestant's relative quality....
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