Abstract:

In digital platforms， it is often challenging to provide users with comprehensive information about the quality of digital content products. To address this issue， many firms have adopted strategies that involve offering partial product content for free experience （FE）. On video streaming platforms， users can watch certain content for free； music platforms provide extensive libraries of trial tracks； game platforms offer free trial versions of some games， and e-book platforms allow users to access free sample chapters. The FE strategy allows users to experience the product firsthand， which is beneficial in reducing information asymmetry regarding product quality.Traditional signaling game models typically involve only the signaling sender and receiver. In this paper， the platform， acting as an intermediary， is incorporated into the signaling game as an additional participant. A microeconomic theoretical model is constructed based on the signaling theory to analyze the signaling effects of firms providing FE to users on platforms. Some typical features of FE are incorporated into a signaling game model， with a particular focus on scenarios where the quality of FE fails to convey information. By comparing equilibrium solutions in cases where the platform does not participate in the game and where the platform does participate in the game， the influence of the platform is investigated as an intermediary in the signaling game.The managerial insights of this paper include two main points. Firstly， platforms should establish a screening mechanism， imposing certain advertising fees thresholds on firms. This would benefit users in distinguishing firms with varying levels of quality and mitigate the issue of information asymmetry regarding product quality. Secondly， platforms should incentivize firms to maintain consistency in the quality of their trial products and final products. When there is a significant disparity between the quality of trial products and final products in the market， users will no longer rely on the quality of free trials to assess product quality. This， in turn， diminishes the effectiveness of free trials as a means of conveying information， ultimately harming the welfare of both the platform and the firms. When users generally lack trust in the quality of trial products， it can lead to a collapse of market trust， resulting in a “lose-lose” situation.The main findings of our paper are as follows　（1） When considering the informational role of FE quality， the high-quality firms can obtain higher profits if it is difficult for the low-quality firms to imitate. Conversely， if the imitation is relatively easy， high-quality firms need to increase their investment in FE to render the imitation behavior of low-quality firms unprofitable. （2） The informational effect of FE quality is more prominent in the short term. In cases of repeat purchases， whether the FE quality conveys information or not does not significantly impact the profits of the platform and the firms. （3） When the FE quality fails to convey any information， the platform should charge firms a certain threshold of advertising fees. This measure ensures that low-quality firms will find it unprofitable to imitate high-quality firms， while high-quality firms will not exit the market due to excessively high platform fees， ultimately promoting the occurrence of separating equilibria.

Key words: free experience, platform, digital contents, signaling effects