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Pricing and trust

Huck, S.; Luenser, G.; Tyran, J.-R.; (2008) Pricing and trust. (ELSE Working Papers 245). ESRC Centre for Economic Learning and Social Evolution: London, UK. Green open access


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We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive (monopolistic) markets. We then introduce a regulated intermediate price above the oligopoly price and below the monopoly price. In monopolies volume increases and so does quality, such that overall efficiency is raised by 50%. Somewhat surprisingly, the same pattern emerges in oligopolies. In fact, across all market forms transaction volume and traded quality are maximal in regulated oligopolies.

Type: Working / discussion paper
Title: Pricing and trust
Open access status: An open access version is available from UCL Discovery
Publisher version: http://else.econ.ucl.ac.uk/newweb/papers.php#2008
Language: English
Keywords: C72, C90, D40, D80, L10
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14453
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