"Download for Free" - When Do Providers of Digital Goods Offer Free Samples?
AbstractIn a monopoly setting where consumers cannot observe the quality of the product we show that free samples which are of a lower quality than the marketed digital goods are used together with high prices as signals for a superior quality if the number of informed consumers is small and if the difference between the high and the low quality is not too small. Social welfare is higher, if the monopolist uses also free samples as signals, compared to a situation where he is restricted to pure price signalling. Both, the monopolist and consumers benefit from the additional signal.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 70.
Date of creation: Sep 2004
Date of revision:
Contact details of provider:
Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany
Web page: http://www.sfbtr15.de/
More information through EDIRC
Digital Goods; Free Samples; Multi-dimensional Signalling;
Other versions of this item:
- Boom, Anette, 2004. ""Download for Free": When do providers of digital goods offer free samples?," Discussion Papers 2004/28, Free University Berlin, School of Business & Economics.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-01 (All new papers)
- NEP-CUL-2005-12-01 (Cultural Economics)
- NEP-IND-2005-12-01 (Industrial Organization)
- NEP-MIC-2005-12-01 (Microeconomics)
- NEP-MKT-2005-12-01 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ram Orzach & Per Baltzer Overgaard & Yair Tauman, 2001.
"Modest Advertising Signals Strength,"
CIE Discussion Papers
2001-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Cho, In-Koo & Kreps, David M, 1987.
"Signaling Games and Stable Equilibria,"
The Quarterly Journal of Economics,
MIT Press, vol. 102(2), pages 179-221, May.
- Berger, Helge & Hefeker, Carsten, 2005.
"One Country, One Vote? Labor Market Structure and Voting Rights in the ECB,"
Journal of Economic Integration,
Center for Economic Integration, Sejong University, vol. 20, pages 672-687.
- Helge Berger & Carsten Hefeker, 2004. "One Country, One Vote? Labor Market Structure and Voting Rights in the ECB," CESifo Working Paper Series 1165, CESifo Group Munich.
- Berger, Helge & Hefeker, Carsten, 2004. "One country, one vote? Labor market structure and voting rights in the ECB," Discussion Papers 2004/10, Free University Berlin, School of Business & Economics.
- Kamp, Brad, 1998. "Complimentarily yours: Free examination copies and textbook prices: Comment," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 527-533, July.
- Kyle Bagwell & Michael Riordan, 1988.
"High and Declining Prices Signal Product Quality,"
808, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- Sébastien Lecocq & Thierry Magnac & Marie-Laure Pichery & Michael Visser, 1999.
"The Impact of Information on Wine Auction Prices : Results of an Experiment,"
99-36, Centre de Recherche en Economie et Statistique.
- Sébastien LECOCQ & Thierry MAGNAC & Marie-Claude PICHERY & Michael VISSER, 2005. "The impact of information on wine auction prices: results of an experiment," Annales d'Economie et de Statistique, ENSAE, issue 77, pages 37-57.
- Sebastien Lecocq & Thierry Magnac & Marie-Claude Pichery & Michael Visser, 2004. "The impact of information on wine auction prices: results of an experiment," Research Unit Working Papers 0401, Laboratoire d'Economie Appliquee, INRA.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- repec:fth:inseep:9936 is not listed on IDEAS
- Moraga-Gonzalez, Jose Luis, 2000.
"Quality uncertainty and informative advertising,"
International Journal of Industrial Organization,
Elsevier, vol. 18(4), pages 615-640, May.
- Foster, James E. & Horowitz, Andrew W., 1996. "Complimentarily yours: Free examination copies and textbook prices," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 85-99.
- Volckart, Oliver & Wolf, Nikolaus, 2004. "Estimating medieval market integration: Evidence from exchange rates," Discussion Papers 2004/21, Free University Berlin, School of Business & Economics.
- Anton, James J & Yao, Dennis A, 2002. "The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 513-31, July.
- Kyle Bagwell & Per Baltzer Overgaard, 2005. "Look How Little I’m Advertising!," CIE Discussion Papers 2005-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Alexia Gaudeul, 2010.
"Software marketing on the Internet: the use of samples and repositories,"
Economics of Innovation and New Technology,
Taylor & Francis Journals, vol. 19(3), pages 259-281.
- Gaudeul, Alexia, 2008. "Software Marketing on the Internet: the Use of Samples and Repositories," MPRA Paper 19646, University Library of Munich, Germany.
- Alexia Gaudeul, 2008. "Software Marketing on the Internet: the Use of Samples and Repositories," Working Papers 08-23, Centre for Competition Policy, University of East Anglia.
- Daniel Halbheer & Florian Stahl & Oded Koenigsberg & Donald R. Lehmann, 2013. "Digital Content Strategies," Working Papers 329, University of Zurich, Department of Business Administration (IBW).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank).
If references are entirely missing, you can add them using this form.