Abstract
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.
Original language | English (US) |
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Pages (from-to) | 590-607 |
Number of pages | 18 |
Journal | RAND Journal of Economics |
Volume | 25 |
Issue number | 4 |
DOIs | |
State | Published - 1994 |
ASJC Scopus subject areas
- Economics and Econometrics