Effects of Product Trial on Consumer Expectations, Demand, and Prices

Product quality is often unknown to consumers when they make their purchasing decisions. Demand is thus based on expectations rather than on complete information. This paper models the effects of private information acquired through product trial on consumer expectations, demand, and prices. These effects depend on the quality of the product relative to consumer prior expectations, consumer perceptions of quality, consumer expectation revision mechanisms, and the number of purchasers.