We study trust building in credence goods markets in a dynamic setting. An extreme lemon problem arises in the one-shot game and results in no trade. In the repeated game, an expert’s honesty is monitored through consumers’ rejection of his recommendations. The expert’s profit in the optimal equilibrium weakly increases in the discount factor but cannot achieve the first best, which contrasts sharply with the optimal equilibrium in experience goods markets. Competition enhances efficiency by allowing consumers to search for second opinions after rejecting the first treatment recommendation, but the efficiency gain comes at the cost of less honesty.
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