Managerial Economics Week 7 Individual Work - Assignment Example

The information asymmetry by the buyer will enable him/her to go for more quality tests on the product. An experience good is a good in which its prices and quality are in question by the consumers. After the consumption, the consumer will then be able to ascertain the quality of the product. Consumers then are more likely to pay higher prices for the product because lower prices by the notorious firm will raise the consumers’ eyebrows. Consumers will also be able to question whether there are some problems, which cannot be observed in the market but only upon consumption.

Higher prices indicate how genuine the product can be thus consumers will go for the product at higher prices. Good branding of the products will also contribute towards higher prices by consumers (Holt, 2009). In the long-run, consumers will opt to paying lower prices. The decision to pay lower prices results from the fact that one gets to know the quality of the product after its