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Selling Formats for Search Goods

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Author Info

  • Birger Wernerfelt

    (Massachusetts Institute of Technology)

Abstract

The paper offers a comparative analysis of different ways to sell products (selling formats) when buyers incur evaluation costs. Since these costs are sunk at the moment of trade, buyers may refrain from incurring them for fear of later opportunism on the part of sellers. It is found that the use of many common selling formats can be explained in terms of their ability to alleviate this problem. Specifically, I explain price advertising, seller colocation, and bargaining. The theory explains much of the divergence in retail trading institutions and leads to several testable predictions.

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File URL: http://dx.doi.org/10.1287/mksc.13.3.298
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Bibliographic Info

Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 13 (1994)
Issue (Month): 3 ()
Pages: 298-309

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Handle: RePEc:inm:ormksc:v:13:y:1994:i:3:p:298-309

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Related research

Keywords: game theory; retailing; advertising;

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Citations

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Cited by:
  1. Simon P. Anderson & Régis Renault, 2002. "Advertising Content," Virginia Economics Online Papers 362, University of Virginia, Department of Economics.
  2. Bar-Isaac, Heski, 2005. "Imperfect competition and reputational commitment," Economics Letters, Elsevier, vol. 89(2), pages 167-173, November.
  3. Maria Arbatskaya & Hideo Konishi, 2005. "Referrals in Search Markets," Boston College Working Papers in Economics 614, Boston College Department of Economics, revised 10 May 2011.
  4. Giovanni Ursino & Salvatore Piccolo & Piero Tedeschi, 2013. "Deceptive Advertising with Rational Buyers," CSEF Working Papers 348, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  5. Bing Jing, 2007. "Product differentiation under imperfect information: When does offering a lower quality pay?," Quantitative Marketing and Economics, Springer, vol. 5(1), pages 35-61, March.
  6. Chen, Yongmin & Wang, Ruqu, 2004. "A model of competing selling mechanisms," Economics Letters, Elsevier, vol. 85(2), pages 151-155, November.
  7. Homburg, Christian & Allmann, Jan & Klarmann, Martin, 2014. "Internal and external price search in industrial buying: The moderating role of customer satisfaction," Journal of Business Research, Elsevier, vol. 67(8), pages 1581-1588.
  8. Rami Zwick & Ching Chyi Lee, 1999. "Bargaining and Search: An Experimental Study," Experimental 9902003, EconWPA.
  9. Konishi, Hideo & Sandfort, Michael T., 2002. "Expanding demand through price advertisement," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 965-994, September.
  10. Rhodes, Andrew, 2011. "Multiproduct pricing and the Diamond Paradox," MPRA Paper 32511, University Library of Munich, Germany.
  11. Yongmin Chen & Ruqu Wang, 2004. "Equilibrium Selling Mechanisms," Annals of Economics and Finance, Society for AEF, vol. 5(2), pages 335-355, November.

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