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Markets for Services are Different

5 Pages Posted: 2 Jan 2011  

Ingo Rapold

affiliation not provided to SSRN

Date Written: December 31, 2010


This paper focuses on a major difference between markets for physical goods and for services. It is argued that dishonest sellers of physical goods are eventually identified and forced to leave the market. In contrast, dishonest sellers of services can effectively mimic honest competitors and drive them out of the market. This ability of dishonest service suppliers can lead to market failure. In order to prevent such a failure it is proposed to introduce some kind of market entry fees which have the character of sunk costs.

Keywords: sunk costs, quality uncertainty, search goods, experience goods, credence goods, established suppliers, dishonest sellers, market failure

JEL Classification: D02, D11, D18, D41, D82, D83, G18, K23, L51

Suggested Citation

Rapold, Ingo, Markets for Services are Different (December 31, 2010). Available at SSRN: or

Ingo Rapold (Contact Author)

affiliation not provided to SSRN ( email )

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