Search, adverse selection, and the services of financial experts
DOI:
https://doi.org/10.61190/fsr.v12i4.4771Keywords:
Asymmetric information, Search, Personal financial planningAbstract
A financial expert holding a particular qualification may make an unobservable investment in the expert’s skills. Experts making such an investment can better customize their services to clients’ needls, which some clients value. Quality enhancement is more likely the more customers prefer customization, when profit margins for customization are higher, as customer search frequency and the speed of information dissemination increase, and as the expert’s discount rate, the cost of the quality enhancement, and the number of experts in the market decrease. The latter result indicates expansion of the number of providers holding a particular qualification is not unambiguously desirable.
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