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Price competition and reputation in markets for experience goods: an experimental study

[working paper]

Huck, Steffen; Lünser, Gabriele K.; Tyran, Jean-Robert

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Please use the following Persistent Identifier (PID) to cite this document:http://hdl.handle.net/10419/108947

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Corporate Editor Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract We experimentally examine the effects of price competition in markets for expe-rience goods where sellers can build up reputations for quality. We compare price competition to monopolistic markets and markets where prices are exogenously fixed (somewhere between the endogenous oligopoly and monopoly prices). While oligopolies benefit consumers regardless of whether prices are fixed or endoge-nously chosen, we find that price competition lowers efficiency as consumers pay too little attention to reputation for quality. This provides empirical support to recent models in behavioral industrial organization that assume that consumers may with increasing complexity of the market place focus on selected dimensions of products. We also find that consumers' attention to quality and, hence, provided quality drops when regulated prices are set at levels that are too low. (author's abstract)
Keywords market; price; regulation; competition; product; quality; consumer; price level
Classification Marketing
Document language English
Publication Year 2015
City Berlin
Page/Pages 28 p.
Series Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Ökonomik des Wandels, SP II 2013-312r
Status Published Version; reviewed
Licence Deposit Licence - No Redistribution, No Modifications