Price Competition Between an Expert and a Non-Expert
AbstractThis paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expert’s repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behaviour of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a ‘timid-pricing’ equilibrium results. If the non-expert’s repair technology performs well enough, it pays for some consumers to disregard the non-expert. They directly go to the expert’s shop, and an ‘aggressive-pricing’ equilibrium results. For intermediate values of the non-expert’s successful repair a ‘mixed-pricing’ equilibrium emerges where the expert randomizes over the monopoly price and some lower price.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1905.
Date of creation: Jun 1998
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Bouckaert, Jan & Degryse, Hans, 2000. "Price competition between an expert and a non-expert," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 901-923, August.
- Bouckaert, J.M.C. & Degryse, H.A., 1998. "Price competition between an expert and a non-expert," Discussion Paper 1998-49, Tilburg University, Center for Economic Research.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
- Krugman, Paul R., 1989.
"Industrial organization and international trade,"
Handbook of Industrial Organization,
in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
- Taylor, Curtis R, 1995. "The Economics of Breakdowns, Checkups, and Cures," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 53-74, February.
- Ailsa Röell & Marco Pagano, 1991.
"Auction and Dealership Markets: What is the Difference?,"
FMG Discussion Papers
dp125, Financial Markets Group.
- Pagano, Marco & Roell, Ailsa, 1992. "Auction and dealership markets : What is the difference?," European Economic Review, Elsevier, vol. 36(2-3), pages 613-623, April.
- Che, Y.K., 1995.
"Customer Return Policies for Experience Goods,"
9509, Wisconsin Madison - Social Systems.
- Kala Krishna, 1989.
"Trade Restrictions as Facilitating Practices,"
NBER Working Papers
1546, National Bureau of Economic Research, Inc.
- Winand Emons, 1994.
"Credence Goods and Fraudulent Experts,"
dp9402, Universitaet Bern, Departement Volkswirtschaft.
- Kala Krishna & Tor Winston, 2000.
"If at First You Don't Succeed...: Profits, Prices and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity,"
NBER Working Papers
7494, National Bureau of Economic Research, Inc.
- Kala Krishna & Tor Winston, 2003. "If at First You Don't Succeed: Profits, Prices, and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 573-597, 05.
- Dulleck, Uwe & Kerschbamer, Rudolf, 2009.
"Experts vs. discounters: Consumer free-riding and experts withholding advice in markets for credence goods,"
International Journal of Industrial Organization,
Elsevier, vol. 27(1), pages 15-23, January.
- Uwe Dulleck & Rudolf Kerschbamer, 2005. "Experts vs. discounters: consumer free riding and experts withholding advice in markets for credence goods," Economics working papers 2005-09, Department of Economics, Johannes Kepler University Linz, Austria.
- Uwe Dulleck & Rudolf Kerschbamer, 2007. "Experts vs. Discounters: Consumer Free Riding and Experts Withholding Advice in Markets for Credence Goods," Working Papers 2007-21, Faculty of Economics and Statistics, University of Innsbruck.
- Paul De Grauwe & Laura Rinaldi, 2002. "A Model of the Card Payment System and the Interchange Fee," CESifo Working Paper Series 796, CESifo Group Munich.
- Alexandre Gaudeul, 2004. "Shareware competition: Selling an experience," Game Theory and Information 0409008, EconWPA.
- GRILO, Isabel & WAUTHY, Xavier, .
"Price competition when product quality is uncertain,"
CORE Discussion Papers RP
-1509, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Isabel GRILO & Xavier WAUTHY, 2000. "Price Competition when Product Quality is Uncertain," Discussion Papers (REL - Recherches Economiques de Louvain) 2000043, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Dulleck, Uwe & Kerschbamer, Rudolf, 2005. "Experts vs Discounters: Competition and Market Unravelling When Consumers Do Not Know What they Need," CEPR Discussion Papers 5242, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.