The Company You Keep: Qualitative Uncertainty in Providing Club Goods
Clubs are typically experience goods. Potential members cannot ascertain precisely beforehand their quality (dependent endogenously on the club's facility investment and number of users, itself dependent on its pricing policy). Members with unsatisfactory initial experiences discontinue visits. We show that a monopoly profit maximiser never offers a free trial period for such goods but, for a quality function homogeneous of any feasible degree, a welfare maximiser always does. When the quality function is homogeneous of degree zero, the monopolist provides a socially excessive level of quality to repeat buyers. In other possible regimes, the monopolist permits too little club usage.
|Date of creation:||Oct 2006|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
Phone: (0)1904 323776
Web page: https://www.york.ac.uk/economics/
More information through EDIRC
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.:
- J. Miguel Villas-Boas, 2006. "Dynamic Competition with Experience Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 37-66, 03.
- Kyle Bagwell & Michael Riordan, 1988.
"High and Declining Prices Signal Product Quality,"
808, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kenneth L. Judd & Michael H. Riordan, 1994. "Price and Quality in a New Product Monopoly," Review of Economic Studies, Oxford University Press, vol. 61(4), pages 773-789.
- Hoerger, Thomas J., 1993. "Two-part pricing for experience goods in the presence of adverse selection," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 451-474.
- Glazer, Amihai & Niskanen, Esko & Scotchmer, Suzanne, 1997. "On the uses of club theory: Preface to the club theory symposium," Journal of Public Economics, Elsevier, vol. 65(1), pages 3-7, July.
- Julia Liebeskind & Richard P. Rumelt, 1989. "Markets for Experience Goods with Performance Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 601-621, Winter.
- Jacques Cremer, 1984. "On the Economics of Repeat Buying," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 396-403, Autumn.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August.
- Dirk Bergemann & Juuso Valimaki, 2004. "Monopoly Pricing of Experience Goods," Cowles Foundation Discussion Papers 1463R, Cowles Foundation for Research in Economics, Yale University, revised May 2005.
- Sandler, Todd & Sterbenz, Frederic P & Tschirhart, John, 1985. "Uncertainty and Clubs," Economica, London School of Economics and Political Science, vol. 52(208), pages 467-77, November.
- Barro, Robert J & Romer, Paul M, 1987. "Ski-Lift Pricing, with Applications to Labor and Other," American Economic Review, American Economic Association, vol. 77(5), pages 875-890, December.
- Fraser, Clive D., 2000. "When Is Efficiency Separable from Distribution in the Provision of Club Goods?," Journal of Economic Theory, Elsevier, vol. 90(2), pages 204-221, February.
When requesting a correction, please mention this item's handle: RePEc:yor:yorken:06/21. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson)
If references are entirely missing, you can add them using this form.