Saints and Markets: Activists and the Supply of Credence Goods

Timothy J. Feddersen · Thomas W. Gilligan

186 citations0/0 files storedJournal of Economics & Management Strategy

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Merger and Competition Analysis Consumer Market Behavior and Pricing Game Theory and Applications

Abstract

This paper contains a theoretical exploration of the potential effects of an information‐supplying activist on a market for credence goods. Using a non‐cooperative game‐theoretic model with incomplete information, we find that such an activist can alter the decisions of firms and consumers and enhance the social welfare of market exchange. We also find that an activist can support equilibria in which firms differentiate their products on some credence characteristic even though this characteristic remains unknown to the consumer both prior and subsequent to consumption. In general, our analysis has several implications for the study of private collective action in markets.

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References

1970The Market for "Lemons": Quality Uncertainty and the Market Mechanism 1970Information and Consumer Behavior 1976Toward a More General Theory of Regulation 1983A Theory of Competition Among Pressure Groups for Political Influence 1973Free Competition and the Optimal Amount of Fraud 2007Risk Ownership in Contract Manufacturing 1999Information Revelation and Certification Intermediaries 1997Credence Goods and Fraudulent Experts

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2006Readership and Purpose in the Choice of Economics Metaphors 2006A Theory of Consumer Boycotts Under Symmetric Information and Imperfect Competition 2019Orchestrating corporate social responsibility in the multinational enterprise 2006A Positive Theory of Moral Management, Social Pressure, and Corporate Social Performance 2012Environmental Disclosure 2005Strategic Activism and Nonmarket Strategy

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