A Search Model of Experience Goods
Yongmin Chen (),
Zhuozheng Li and
Tianle Zhang ()
MPRA Paper from University Library of Munich, Germany
The economics literature on consumer search has focused on inspection goods, the quality of which is observed before purchase. This paper studies a model of experience goods where consumers search for desired varieties but can observe product quality only after consumption. The model yields price and welfare results that are contrary to those for inspection goods. Specifically, we find that equilibrium price may rise even when search intensity is higher and, under plausible conditions, both consumer and social welfare are initially increasing in search cost. Our analysis shows that quality observability is a key determinant of how search markets function.
Keywords: consumer search; experience goods; inspection goods; product quality; search cost (search for similar items in EconPapers)
JEL-codes: D8 L1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-dge, nep-mic and nep-ore
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https://mpra.ub.uni-muenchen.de/98657/1/MPRA_paper_98657.pdf revised version (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93547
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