Google Research


  • Michael Schwarz
  • Alex Frankel
Economic Inquiry (2013) (to appear)


A market where short-lived customers interact with long-lived experts is considered. Experts privately observe which treatment best serves a customer, but are free to choose more or less profitable treatments. Customers only observe records of experts' past actions. If experts are homogeneous there exists an equilibrium where experts always choose the customer's preferred treatment (play truthfully). Experts are incentivized with the promise of future business: new customers tend to choose experts who performed less profitable treatments in the past. If expert payoffs are private information, experts can never always be truthful. But sufficiently patient experts may be truthful almost always.

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