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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Ivan Getiashvili
Digital Marketing Consulting as a Credence Good
2019
Many markets that we face in real day to day life are considered as markets of credence goods. Either you need your car repaired or you need a complex medical treatment you will necessarily face asymmetric information problem.

Experts always know better what the real problem is and what treatment is needed. Since consumers on such markets lack expertise then experts often have incentives to defraud the customer (for example, provide unnecessary treatment or extra- charge customer with no additional value provided).

Being unsolved, that problem might lead to bad equilibrium and even the whole markets can fall apart. Sometimes market participants successfully solve the problem without government regulations, but in some cases some special legislation is necessary.

In this theoretical paper I model the market of digital marketing consulting as an example of the market where a third party is present and create additional incentives for the expert to deviate from honest behavior.

The main question is whether such market interactions can result in “honest” equilibrium if several basic assumptions are hold. What is the actual equilibrium and actual payoffs of each agent? What are the parameters of the interaction which do and do not influence the outcome? The main results of the work are that with no government regulation fully «honest» equilibrium is not achievable.

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