INFORMATION-TRANSMISSION IN REGULATED MARKETS

The seminal papers of Crawford and Sobel (1982) and Green and Stokey (1980) study models in which a signal about the state of the world is transmitted from a perfectly informed sender to an uninformed receiver. We study a model in which multiple signallers compete for consumers. The questions asked are: How much information is revealed? How does consumers' shopping around affect this information? How is each affected by incentives? An implication of the model is that in a price-regulated market for health care, patients should not be prohibited from gathering more than one opinion.