Shareware competition: Selling an experience

Alexandre Gaudeul

Game Theory and Information from EconWPA

Abstract: A firm may allow customers to learn the value of its product prior to buying it. This increases their willingness to pay, even though it also leads some not to buy. That strategy may also be used as a competitive tool to increase its product's attractiveness. This paper examines competition between ex-ante identical firms that sell horizontally differentiated and mutually exclusive experience goods. Customers incur set-up costs when buying a good, but those set-up costs are partly recoverable if they then decide to buy the product of a competitor. The main conclusion from this paper is that while a firm that gives information about its product makes higher profits than a competing firm that chooses not to do so, a firm may however choose that last option in order to avoid being in direct competition with a firm that is more open about the value of its product.

Keywords: Experience goods; Transaction costs; Technical compatibility; Mechanism competition; information goods; sampling; switching costs (search for similar items in EconPapers)
JEL-codes: D82 D42 D43 (search for similar items in EconPapers)
Date: 2004-09-17
Note: Type of Document - pdf; pages: 46
View list of references

Downloads: (external link)
http://129.3.20.41/eps/game/papers/0409/0409008.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0409008

Access Statistics for this paper

More papers in Game Theory and Information from EconWPA
Series data maintained by EconWPA ().