In a monopoly setting where consumers cannot observe the quality
of the product we show that free samples which are of a lower quality
than the marketed digital goods are used together with high prices
as signals for a superior quality if the number of informed consumers
is small and if the di®erence between the high and the low quality
is not too small. Social welfare is higher, if the monopolist uses also
free samples as signals, compared to a situation where he is restricted
to pure price signalling. Both, the monopolist and consumers bene¯t
from the additional signal.
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