Price and Quality Cycles for Experience Goods
We explore a dynamic, competitive model for experience goods and study an equilibrium for it in which firms plan initially to produce high quality at low price, then high quality at high price, then low quality at high price. Each consumer is aware that all firms eventually intend to run down their reputations at customers' expense, yet he rationally chooses to wait for direct evidence that the firm to which he is attached has already entered into the exploitative phase.
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|Date of creation:||Jun 1992|
|Date of revision:|
|Contact details of provider:|| Postal: Boston University, Industry Studies Program; Department of Economics, 270 Bay Road, Boston, Massachusetts 02215.|
Web page: http://www.bu.edu/econ/isp/
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