It’s good to be bad: The low quality advantage in consumer search markets

Stuart Baumann and Margaryta Klymak

Economics Letters, 2022, vol. 215, issue C

Abstract: The management and marketing literature has found that consumers generally expect high-quality sellers to post high prices. We show that low-quality firms can exploit this in search markets to generate a low price perception. This price perception can lead to low-quality firms dominating search markets while producing a vertically inferior good at equal cost to high-quality firms.

Keywords: Consumer search; Price perception; Quality (search for similar items in EconPapers)
JEL-codes: D83 L15 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:215:y:2022:i:c:s0165176522001367

DOI: 10.1016/j.econlet.2022.110518

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