University of Cambridge > Talks.cam > Economics & Policy Seminars, CJBS > CONFLICTS OF INTEREST, ETHICAL RULES, AND COMPETITION

CONFLICTS OF INTEREST, ETHICAL RULES, AND COMPETITION

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A light lunch will be available from 12:00 in room W4.05

Attorneys are conflicted when simultaneously representing plaintiff and defendant. So are strategy consultants offering advice to competing firms. We show that such representational conflicts of interests give rise to negative network externalities in professional service markets, granting the firms market power. A strict professional standard for acting, i.e. undivided loyalty, may strengthen negative network externalities and reduce competition even further. In contrast, strict standards for Chinese walls intensify competition. Representational conflicts of interest constrain firms’ incentives to merge, favouring an unconcentrated market, thereby indirectly reducing the frequency of conflicts of interest.

This talk is part of the Economics & Policy Seminars, CJBS series.

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