Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of cases
- Preface
- Part I Getting started
- Part II Market power
- Part III Sources of market power
- Part IV Pricing strategies and market segmentation
- Part V Product quality and information
- Part VI Theory of competition policy
- Part VII R&D and intellectual property
- Part VIII Networks, standards and systems
- Part IX Market intermediation
- Appendices
- Index
Part V - Product quality and information
- Frontmatter
- Contents
- List of figures
- List of tables
- List of cases
- Preface
- Part I Getting started
- Part II Market power
- Part III Sources of market power
- Part IV Pricing strategies and market segmentation
- Part V Product quality and information
- Part VI Theory of competition policy
- Part VII R&D and intellectual property
- Part VIII Networks, standards and systems
- Part IX Market intermediation
- Appendices
- Index
Summary
Introduction to Part V: Product quality and information
So far in this book, we have mainly been dealing with search goods, i.e., products or services with features and characteristics that can be easily evaluated before purchase. In contrast, this part of the book examines products and services with characteristics that can only be ascertained upon consumption because they are difficult to observe in advance. We talk here of experience goods.
Managing experience goods is the day-to-day concern of large firms selling consumer goods, such as Nestlé, Procter&Gamble, or Unilever. These firms frequently introduce new branded products. They are always interested in not only making consumers aware of the product (e.g., through advertising as we have analysed in Chapter 6) but also in convincing consumers that the new product satisfies their wants. Perhaps the main challenge when launching a new product is that consumers do not observe the quality of the product, as is typically the case with experience goods. Similarly, firms that enter an otherwise perfectly competitive industry with a patented product (or, alternatively open new markets with a proprietary technology) often produce an experience good.
These markets are characterized by asymmetric information as consumers have less information than the producers about product quality. In such markets, firms have to convince consumers that their products are of high quality.
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- Industrial OrganizationMarkets and Strategies, pp. 283 - 284Publisher: Cambridge University PressPrint publication year: 2010