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Reciprocity, social ties, and competition in markets for experience goods

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Reciprocal customers may disproportionately improve the performance of markets for experience goods. Reciprocal customers reward (punish) firms for providing good (bad) quality by upholding (terminating) the customer relation. This may induce firms to provide good quality which, in turn, may induce a positive externality for non-reciprocal customers who would, in the absence of reciprocal types, face market breakdown. This efficiency-enhancing effect of reciprocity is boosted when there are social ties between consumers and competition between firms. The existence of social ties or competition alone does not improve market performance
OriginalsprogEngelsk
TidsskriftJournal of Socio-Economics
Vol/bind36
Udgave nummer2
Sider (fra-til)191-203
ISSN1053-5357
DOI
StatusUdgivet - 2007

Bibliografisk note

JEL Classification: D43, L14, Z13

ID: 409438