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Price competition between an expert and a non-expert

Author

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  • Bouckaert, J.M.C.
  • Degryse, H.A.

    (Tilburg University, School of Economics and Management)

Abstract

This paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expert’s repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behaviour of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a ‘timid-pricing’ equilibrium results. If the non-expert’s repair technology performs well enough, it pays for some consumers to disregard the non-expert. They directly go to the expert’s shop, and an ‘aggressive-pricing’ equilibrium results. For intermediate values of the non-expert’s successful repair a ‘mixed-pricing’ equilibrium emerges where the expert randomizes over the monopoly price and some lower price.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bouckaert, J.M.C. & Degryse, H.A., 1998. "Price competition between an expert and a non-expert," Other publications TiSEM 214c7526-7eeb-47ce-af08-7, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:214c7526-7eeb-47ce-af08-73c474225dca
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alexandre Gaudeul, 2004. "Shareware competition: Selling an experience," Game Theory and Information 0409008, University Library of Munich, Germany.
    2. Dulleck, Uwe & Kerschbamer, Rudolf, 2009. "Experts vs. discounters: Consumer free-riding and experts withholding advice in markets for credence goods," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 15-23, January.
    3. David Bardey & Denis Gromb & David Martimort & Jérôme Pouyet, 2020. "Controlling Sellers Who Provide Advice: Regulation and Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 68(3), pages 409-444, September.
    4. Kala Krishna & Tor Winston, 2003. "If at First You Don't Succeed: Profits, Prices, and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 573-597, May.
    5. Kerschbamer, Rudolf & Dulleck, Uwe, 2005. "Experts vs Discounters: Competition and Market Unravelling When Consumers Do Not Know What they Need," CEPR Discussion Papers 5242, C.E.P.R. Discussion Papers.
    6. Isabel GRILO & Xavier WAUTHY, 2000. "Price Competition when Product Quality is Uncertain," Discussion Papers (REL - Recherches Economiques de Louvain) 2000043, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Paul De Grauwe & Laura Rinaldi, 2002. "A Model of the Card Payment System and the Interchange Fee," CESifo Working Paper Series 796, CESifo.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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