AI summary · arXiv: 2311.00846v1 · econ.TH
From Doubt to Devotion: Trials and Learning-Based Pricing
The essentials
- Informed sellers use dynamic mechanisms to sell experience goods
- There is a belief gap between informed sellers and uninformed buyers
- Mechanisms are designed to cater to skeptical buyers, with limited initial access and upgrade options based on positive experiences
- The form of these mechanisms depends on the seller's screening technology, commonly seen as free trials or tiered pricing structures in digital markets
- Having access to consumer data can reduce sellers' revenue in equilibrium because informed sellers fine-tune their strategies based on data forecasting the buyer's learning process
- This research highlights the importance of addressing skepticism and providing opportunities for buyers to upgrade based on personal experiences
- Consumer data plays a crucial role in shaping dynamic designs and impacting sellers' revenue outcomes.
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