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FREE PRODUCT TRIALS: DISCLOSING QUALITY AND MATCH VALUE
Author(s) -
Lubensky Dmitry,
Schmidbauer Eric
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12858
Subject(s) - quality (philosophy) , product (mathematics) , economics , marginal value , value (mathematics) , consumer welfare , microeconomics , contrast (vision) , welfare , consumer demand , econometrics , computer science , mathematics , market economy , philosophy , geometry , epistemology , machine learning , artificial intelligence
A prepurchase trial allows a consumer to learn both a product's quality and how well it matches her idiosyncratic taste. By offering a trial, the marginal seller thus shifts up demand by increasing perceived quality and rotates demand by revealing match. In contrast to classic results,a trial is offered only when quality is sufficiently high, and sometimes not at all. Fewer trials are offered when match is more important and when there are fewer gains from trade. “Cooling off” rules allowing free returns are effectively mandatory trials, benefiting consumers but decreasing welfare when there are sufficient gains from trade. ( JEL D18, L15, L5)