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On the Formal Theory of Inspection and Evaluation in Product Markets

Wilde, Louis L. (1976) On the Formal Theory of Inspection and Evaluation in Product Markets. Social Science Working Paper, 146. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper builds a formal theory of consumer behavior under imperfect information when goods are described by multiple characteristics which vary in their degree of "observability." An optimal strategy for the consumer is shown to exist. In general, this strategy is shown to involve both inspection (sampling to observe general characteristics of goods) and evaluation (consumption of goods to observe specific characteristics). Comparative statics of the optimal strategy are also analyzed.

Item Type:Report or Paper (Working Paper)
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Additional Information:Published as Wilde, Louis L. "On the formal theory of inspection and evaluation in product markets." Econometrica: Journal of the Econometric Society (1980): 1265-1279.
Group:Social Science Working Papers
Subject Keywords:Repurchasing, Durability, Consumer prices, Reservation prices, Utility rates, Utilities costs, Optimal policy, Consumer goods, Economic theory, Density distributions
Series Name:Social Science Working Paper
Issue or Number:146
Record Number:CaltechAUTHORS:20171026-133232604
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82701
Deposited By: Jacquelyn Bussone
Deposited On:27 Oct 2017 17:57
Last Modified:03 Oct 2019 18:57

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