Price competition and reputation in markets for experience goods: An experimental study
- Author(s)
- Steffen Huck, Gabriele Lünser, Jean-Robert Tyran
- Abstract
We experimentally examine the effects of price competition in markets for experience goods where sellers can build up reputations for quality. We compare price competition to monopolistic markets and markets where prices are exogenously fixed. Although oligopolies benefit consumers regardless of whether prices are fixed or endogenously 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 marketplace, focus on selected dimensions of products.
- Organisation(s)
- Department of Economics, Vienna Center for Experimental Economics
- External organisation(s)
- Center for Civil Society Research, University College London, Center for Economic Learning and Social Evolution (ELSE)
- Journal
- RAND Journal of Economics
- Volume
- 47
- Pages
- 99-117
- No. of pages
- 19
- ISSN
- 0741-6261
- DOI
- https://doi.org/10.1111/1756-2171.12120
- Publication date
- 01-2016
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502045 Behavioural economics, 502013 Industrial economics, 502021 Microeconomics
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/price-competition-and-reputation-in-markets-for-experience-goods-an-experimental-study(716235b8-2c81-4f69-852a-b6bf7b3ebd7c).html