From doubt to devotion: trials and learning-based pricing

Tan Gan and Nicholas Wu

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: An informed seller designs a dynamic mechanism to sell an experience good. The seller has private information about product match, which affects the buyer’s private consumption experience. The belief gap between both parties coupled with the buyer’s learning yields mechanisms providing the skeptical buyer with limited access to the product and an option to upgrade if the buyer is swayed by a good experience. Depending on the seller’s screening technology, this takes the form of free/discounted trials or dynamic tiered pricing, which are prevalent in digital markets. Unlike static environments, having consumer data can reduce sellers’ revenue in equilibrium.

Keywords: dynamic mechanism design; informed principal; signaling; trial mechanisms (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2026-08-13
New Economics Papers: this item is included in nep-com, nep-des and nep-mic
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Published in Journal of Political Economy, 13, August, 2026. ISSN: 0022-3808

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