A monopoly seller advises buyers about which of two goods best fits their needs but may be tempted to steer buyers towards the higher margin good. For the seller to collect information and provide truthful advice, the profits from both goods must lie within an 'implementability cone'. In the optimal regulation, pricing distortions and information-collection incentives are controlled separately by price regulation and fixed rewards respectively. This no longer holds when the seller has private information about costs as both problems interact. We study the extent to which competition and buyers' threat to switch sellers can substitute for regulation.
BARDEY, D., GROMB, D., MARTIMORT, D. and POUYET, J. (2017). Drugs, Show-Room and Financial Products: A Theory of Competing Experts,