"Download for Free": When do providers of digital goods offer free samples?
In 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.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: Garystr. 21, 14195 Berlin (Dahlem)|
Phone: (030) 838 2272
Fax: (030) 838 2129
Web page: http://www.wiwiss.fu-berlin.de/en/index.html
More information through EDIRC
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.:
- In-Koo Cho & David M. Kreps, 1997.
"Signaling Games and Stable Equilibria,"
Levine's Working Paper Archive
896, David K. Levine.
- repec:crs:wpaper:9936 is not listed on IDEAS
- 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.
- Moraga-Gonzalez, Jose Luis, 2000.
"Quality uncertainty and informative advertising,"
International Journal of Industrial Organization,
Elsevier, vol. 18(4), pages 615-640, May.
- Paul R. Milgrom & John Roberts, 1984.
"Price and Advertising Signals of Product Quality,"
Cowles Foundation Discussion Papers
709, Cowles Foundation for Research in Economics, Yale University.
- 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.
- 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.
- 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.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Sabine Stephan, 2002.
"German Exports to the Euro Area,"
Discussion Papers of DIW Berlin
286, DIW Berlin, German Institute for Economic Research.
- repec:adr:anecst:y:2005:i:77:p:05 is not listed on IDEAS
- Hao Zhao, 2000. "Raising Awareness and Signaling Quality to Uninformed Consumers: A Price-Advertising Model," Marketing Science, INFORMS, vol. 19(4), pages 390-396, January.
- Bagwell, Kyle & Riordan, Michael H, 1991.
"High and Declining Prices Signal Product Quality,"
American Economic Review,
American Economic Association, vol. 81(1), pages 224-39, March.
- James J. Anton & Dennis A. Yao, 2002. "The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 513-531.
- 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.
- Sébastien Lecocq & Thierry Magnac & Marie-Claude Pichery & Michael Visser, 2005. "The impact of information on wine auction prices: results of an experiment," Annals of Economics and Statistics, GENES, issue 77, pages 37-57.
- Sébastien Lecocq & Thierry Magnac & Marie-Laure Pichery & Michael Visser, 1999. "The Impact of Information on Wine Auction Prices : Results of an Experiment," Working Papers 99-36, Centre de Recherche en Economie et Statistique.
- 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.
- Volckart, Oliver & Wolf, Nikolaus, 2004. "Estimating medieval market integration: Evidence from exchange rates," Discussion Papers 2004/21, Free University Berlin, School of Business & Economics.
- 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.
- 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 & 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.
When requesting a correction, please mention this item's handle: RePEc:zbw:fubsbe:200428. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.