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Free Product Trials: Disclosing Quality And Match Value

Author

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  • Dmitry Lubensky
  • Eric Schmidbauer

Abstract

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)

Suggested Citation

  • Dmitry Lubensky & Eric Schmidbauer, 2020. "Free Product Trials: Disclosing Quality And Match Value," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1565-1576, October.
    • Handle: RePEc:bla:ecinqu:v:58:y:2020:i:4:p:1565-1576
    DOI: 10.1111/ecin.12858
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    References listed on IDEAS

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    Cited by:

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    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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