Information Spillovers in Experience Goods Competition

Zhuoqiong Charlie Chen, Christopher T. Stanton and Catherine Thomas

No 28584, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When experience goods compete, consuming one product can be informative about value for similar untried products. We study a two-period model of duopoly competition in markets that have this feature and where firms can price discriminate between consumers based on purchasing history. Price dynamics, firm profits, and consumer surplus depend on how information spillovers shape demand from the consumers who have trialed the rival product—the potential switchers. In the first period, rather than competing intensely for all future profits, firms compete only for the difference in future profits between repeat and switching consumers. Demand-side information spillovers offer an explanation of how competing firms in new product markets can be profitable in all periods even when selling products that are indistinguishable ex ante.

JEL-codes: D11 L1 L13 L15 L26 M21 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
Note: IO PR
References: Add references at CitEc
Citations:

Published as Zhuoqiong Chen & Christopher Stanton & Catherine Thomas, 2024. "Information Spillovers in Experience Goods Competition," Management Science, vol 70(6), pages 3923-3950.

Downloads: (external link)
http://www.nber.org/papers/w28584.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: https://EconPapers.repec.org/RePEc:nbr:nberwo:28584

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28584

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().