Chen, Zhuoqiong Charlie. <br/><br/>
Information Spillovers in Experience Goods Competition / 
Zhuoqiong Charlie Chen, Christopher T. Stanton, Catherine Thomas. 
 - Cambridge, Mass.  National Bureau of Economic Research  2021. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w28584 .
 - Working Paper Series (National Bureau of Economic Research)  no. w28584. .
<br/><br/> March 2021. 
<br/><br/> 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. 
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