Experience Goods, Tournaments, and Oligopolistic Markets


The quality of products or services with experience goods characteristics can often not be inspected before buying. Hence, measuring the quality before consuming is difficult or impossible for “normal” individuals. The producers cannot be identified as high or low quality producers before selling the product. As a result, consumers build expectations about the product’s quality that are lower than the high quality and higher than the low quality product. There is only one price in the market for all quality types of goods. This gives rise to the famous “lemons” problem, where the suppliers of low quality goods are free riding on the existence of high quality goods in the market


Market Share Reaction Function Cost Advantage Experience Good Profit Function 
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  1. 3.
    See M. Porter (1980) and Besanko, Drove, and Shanley (2000) for the theory of strategic position.Google Scholar

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