Abstract
We present a model of seller expertise, expressed in our setting as the accuracy of seller beliefs about buyers. Principally, both buyers and sellers are heterogeneous ex-ante, the former with respect to their marginal valuation for quality of a good and the latter with respect to expertise. Information asymmetries from both private buyer valuations and uncertainty regarding the number of competing sellers per buyer give rise to imperfectly competitive equilibria, in which sellers offer screening menus. We characterize equilibria generically through results concerning existence, uniqueness, a ranking property of menus with respect to the indirect utilities offered to each type of buyer, as well as link between the sellers' belief about being in a high valuation buyer match and the generosity of their bids. Using our analytic characterization, we explore variations in market structure to study the effects of expertise on trade. Expertise is uniformly efficiency enhancing but inherently redistributive. On the demand side, low valuation buyers benefit while high valuation buyers suffer. On the supply side, expertise not only benefits sellers who possess it, but even those who do not.
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