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Information availability and ability choice in a market for physicians

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  • Edgardo Lara Córdova
  • Javier A. Rodríguez‐Camacho

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.

Suggested Citation

  • Edgardo Lara Córdova & Javier A. Rodríguez‐Camacho, 2022. "Information availability and ability choice in a market for physicians," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 245-267, February.
    • Handle: RePEc:bla:metroe:v:73:y:2022:i:1:p:245-267
    DOI: 10.1111/meca.12361
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