Regulation of Charlatans in High-Skill Professions

47 Pages Posted: 4 Jun 2017 Last revised: 30 Dec 2020

See all articles by Jonathan Berk

Jonathan Berk

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 26, 2019

Abstract

We model a market for a skill in short supply and high demand, where the presence of charlatans (professionals who sell a service they do not deliver on) is an equilibrium outcome. In the model, reducing the number of charlatans through regulation lowers consumer surplus because of the resulting reduction in competition amongst producers. Producers can benefit from this reduction, potentially explaining the regulation we observe. The effect on total surplus depends on the type of regulation. We derive the factors that drive the cross-sectional variation in charlatans (regulation) across professions.

Keywords: Charlatans, Regulation, Information Disclosure, Licensing, Competition

Suggested Citation

Berk, Jonathan B. and van Binsbergen, Jules H., Regulation of Charlatans in High-Skill Professions (August 26, 2019). Stanford University Graduate School of Business Research Paper No. 17-43, Available at SSRN: https://ssrn.com/abstract=2979134 or http://dx.doi.org/10.2139/ssrn.2979134

Jonathan B. Berk

Stanford Graduate School of Business ( email )

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Jules H. Van Binsbergen (Contact Author)

University of Pennsylvania - The Wharton School ( email )

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