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

TY - JOUR

T1 - Reciprocity, social ties, and competition in markets for experience goods

AU - Huck, Steffen

AU - Tyran, Jean-Robert

N1 - JEL Classification: D43, L14, Z13

PY - 2007

Y1 - 2007

N2 - 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

AB - 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

KW - Faculty of Social Sciences

KW - social networks

KW - reputation

KW - customer loyalty

U2 - 10.1016/j.socec.2005.11.051

DO - 10.1016/j.socec.2005.11.051

M3 - Journal article

SN - 2214-8043

VL - 36

SP - 191

EP - 203

JO - Journal of Behavioral and Experimental Economics

JF - Journal of Behavioral and Experimental Economics

IS - 2

ER -