Trial-Offer Markets with Continuation

TL;DR

This paper extends the analysis of trial-offer markets by allowing consumers to try multiple products, showing how a multinomial logit model with continuation can be simplified and exploring its implications on market dynamics.

Contribution

It introduces a generalized multinomial logit model with continuation for trial-offer markets, enabling more realistic modeling of consumer behavior.

Findings

Model reduction to standard multinomial logit with adjusted parameters

Insights into social influence effects on market predictability

Impact of ranking policies on consumer choices

Abstract

Trial-offer markets, where customers can sample a product before deciding whether to buy it, are ubiquitous in the online experience. Their static and dynamic properties are often studied by assuming that consumers follow a multinomial logit model and try exactly one product. In this paper, we study how to generalize existing results to a more realistic setting where consumers can try multiple products. We show that a multinomial logit model with continuation can be reduced to a standard multinomial logit model with different appeal and product qualities. We examine the consequences of this reduction on the performance and predictability of the market, the role of social influence, and the ranking policies.