Shared quality uncertainty and the introduction of indeterminate goods

Author: Lupton, Sylvie¹

Source: Cambridge Journal of Economics, Volume 29, Number 3, May 2005 , pp. 399-421(23)

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Abstract:

The purpose of this paper is to introduce a new category of goods, ‘indeterminate goods’, which will be compared with the classical framework of experience, search and credence goods (Nelson, 1970; Darby and Karni, 1973). This concept sheds new light on the nature and status of quality uncertainty through the following hypothesis: uncertainty about the product's quality can be shared by all agents of the market, and this uncertainty can be non-neutral and disrupt the market. We identify three types of shared uncertainty about the product's characteristics and the corresponding problems that can arise: shared uncertainty due to the emergence of a product (Hirschman, 1974), shared uncertainty concerning the past of a product (basing ourselves on the art market), and finally shared uncertainty regarding the future impacts of a product, through empirical data on product safety.

Keywords: Product quality; Quality uncertainty; Shared uncertainty; Indeterminate goods; Radical uncertainty

Document Type: Research article

DOI: 10.1093/cje/bei009

Affiliations: 1: University of Paris VIII