Experience and Credence Goods - An Introduction
Goods with search characteristics feature low pre-buying costs of quality detection. Hence, the buyer can learn by comparing and inspecting the goods’ attributes before buying. Examples for such goods are clothes, footwear, furniture, cameras, and food
Goods with experience characteristics feature high pre-buying costs of quality detection. Hence, the buyer learns the product’s attributes after buying and consuming. The post-buying costs of quality detection are low for such goods. This information can be used for further consumption of the product. Examples for such goods are jobs, hotels, newspapers, music records and movies, wine, restaurants, food
•|Goods with credence characteristics feature high pre-buying costs and high post-buying costs of quality detection. The utility cannot be exactly determined even after consumption. Examples for such goods are health services, legal advices, and child day care, religious and spiritual guidance
KeywordsInformation Asymmetry Moral Hazard Contract Theory Credence Good Quality Revelation
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- 1.See Laffont and Martimort (2002) for an introduction to contract theory.Google Scholar