Publications
Publications
- June 2024
- Management Science
Information Spillovers in Experience Goods Competition
By: Zhuoqiong Charlie Chen, Christopher Stanton and Catherine Thomas
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.
Keywords
Citation
Chen, Zhuoqiong Charlie, Christopher Stanton, and Catherine Thomas. "Information Spillovers in Experience Goods Competition." Management Science 70, no. 6 (June 2024): 3923–3950.