"Download for Free" - When Do Providers of Digital Goods Offer Free Samples?

Anette Boom

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: 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.

Keywords: Digital Goods; Free Samples; Multi-dimensional Signalling (search for similar items in EconPapers)
JEL-codes: D21 D82 L15 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-cul, nep-ind, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:70

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