- Elgar original reference
Edited by Ruth Towse
Chapter 29: Experience Goods
29 Experience goods Michael Hutter The notion of ‘experience goods’ appears in two strands of literature. The first one originates with Nelson (1970) and links consumer behaviour to information: in order to estimate the utility of an unknown good, the consumer has a choice of searching for information about the good or experiencing the good. Experience goods, in this theoretical tradition, are goods with high search costs. The second strand of literature was triggered by attempts to redefine the set of sectors that make up the economy by introducing a ‘creative sector’ whose branches or industries are characterized by unusually high rates of product change, by high growth rates and by contributions to productivity in the rest of the economy (DCMS, 1998; UNCTAD, 2008). The common feature of these branches is seen in individual ‘creative acts’, but it has also been argued that the consumer’s experience (Bille and Lorenzen, 2008; Bille, 2009) is the decisive feature. The notion of ‘experience goods’ appears to be of increasing theoretical and practical relevance. Experience as a means to an end According to Nelson (1970), consumers who are in the market for goods, but have incomplete information about the benefits obtained from consuming them, have two alternatives to find such information: they can search for available external signals regarding the expected benefits, or they can experience the good and thus generate their own internal information. Experiences in this model are experiments to discover something about the true state of the world that, once attained,...
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