Pricing and Trust
We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive (monopolistic) markets. We then introduce a regulated intermediate price above the oligopoly price and below the monopoly price. The effect in monopolies is more or less in line with standard intuition. As price falls volume increases and so does quality, such that overall efficiency is raised by 50%. However, quite in contrast to standard intuition, we also observe an efficiency rise in response to regulation in oligopolies. Both, transaction volume and traded quality are, in fact, maximal in regulated oligopolies.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Feb 2007|
|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
|Order Information:|| Email: |
References listed on IDEAS
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.:
- Martin Dufwenberg & Uri Gneezy & Jacob Goeree & Rosemarie Nagel, 2007.
"Price floors and competition,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 211-224, October.
- Dufwenberg, Martin & Gneezy, Uri & Goeree, Jacob K. & Nagel, Rosemarie, 2002. "Price Floors and Competition," Research Papers in Economics 2002:13, Stockholm University, Department of Economics.
- Seale, James & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence on Food Consumption Patterns," Technical Bulletins 184321, United States Department of Agriculture, Economic Research Service.
- Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins 33580, United States Department of Agriculture, Economic Research Service.
- Iris Bohnet & Heike Harmgart & Steffen Huck & Jean-Robert Tyran, 2005. "Learning Trust," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 322-329, 04/05.
- Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," American Economic Review, American Economic Association, vol. 94(2), pages 362-366, May.
- Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," CREMA Working Paper Series 2004-09, Center for Research in Economics, Management and the Arts (CREMA).
- Isaac, R Mark & Plott, Charles R, 1981. "Price Controls and the Behavior of Auction Markets: An Experimental Examination," American Economic Review, American Economic Association, vol. 71(3), pages 448-459, June.
- Isaac, R. Mark & Plott, Charles R., "undated". "Price Controls and the Behavior of Auction Markets: An Experimental Examination," Working Papers 253, California Institute of Technology, Division of the Humanities and Social Sciences.
- Huck, Steffen & Lünser, Gabriele K. & Tyran, Jean-Robert, 2012. "Competition fosters trust," Games and Economic Behavior, Elsevier, vol. 76(1), pages 195-209.
- Steffen Huck & Gabriele K. Ruchala & Jean-Robert Tyran, 2006. "Competition Fosters Trust," Discussion Papers 06-22, University of Copenhagen. Department of Economics.
- Huck, Steffen & Ruchala, Gabriele K. & Tyran, Jean-Robert, 2006. "Competition Fosters Trust," CEPR Discussion Papers 6009, C.E.P.R. Discussion Papers.
- Smith, Vernon L & Williams, Arlington W, 1981. "On Nonbinding Price Controls in a Competitive Market," American Economic Review, American Economic Association, vol. 71(3), pages 467-474, June.
- Iris Bohnet & Bruno S. Frey & Steffen Huck, "undated". "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," IEW - Working Papers 052, Institute for Empirical Research in Economics - University of Zurich.
- Claudia Keser, 2002. "Trust and Reputation Building in E-Commerce," CIRANO Working Papers 2002s-75, CIRANO.
- Coursey, Don L & Smith, Vernon L, 1983. "Price Controls in a Posted Offer Market," American Economic Review, American Economic Association, vol. 73(1), pages 218-221, March.
- Bohnet, Iris & Croson, Rachel, 2004. "Trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 443-445, December. Full references (including those not matched with items on IDEAS)