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The Company You Keep: Qualitative Uncertainty in Providing Club Goods

Bipasa Datta and Clive Fraser ()

Discussion Papers from Department of Economics, University of York

Abstract: 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.

Keywords: Clubs; qualitative uncertainty; monopoly; welfarist (search for similar items in EconPapers)
JEL-codes: D42 D60 D80 H4 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-mic
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Journal Article: The company you keep: Qualitative uncertainty in providing a club good (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:06/21

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