Quality Infomediation in Search Markets
23 Pages Posted: 1 Jun 2006 Last revised: 5 Dec 2007
Date Written: December 3, 2007
Abstract
We examine the effects of informational intermediation by a third party 'infomediary' in a search model with heterogeneous seller qualities and asymmetric information. The infomediary earns revenue by selling a list of accredited sellers (a 'guidebook') to buyers and selling accreditations to sellers. We show that such information always improves welfare but can hurt informed buyers (as well as the uninformed) if it is not sufficiently informative about seller qualities. The model also provides a number of insights concerning the private and social incentives to create information, and the determinants and nature of demand for infomediation services by buyers and sellers.
Keywords: informational intermediation, asymmetric information, search
JEL Classification: L15, D82, D83
Suggested Citation: Suggested Citation
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