FREE PRODUCT TRIALS: DISCLOSING QUALITY AND MATCH VALUE

Dmitry Lubensky () and Eric Schmidbauer

Economic Inquiry, 2020, vol. 58, issue 4, 1565-1576

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)

Date: 2020
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