HKS Authors

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Free samples, coupons, and promotion codes are commonplace in business and are targeted at potential customers. However, many of these free transfers could fall into the hands of existing customers, and traditional consumer theory predicts that a small in-kind transfer of a good already being consumed is unlikely to increase the recipient’s consumption of that good. The transfer simply displaces purchases, leading to a marginal propensity to consume of approximately 0%. We test this prediction with a large field experiment conducted in a large online marketplace. Surprisingly, we find an MPC of 17% for transfers going to those already habitually purchasing and consuming the good. A behavioral explanation for this excess consumption is that windfalls are treated more loosely than purchases. However, we find empirical evidence for a rival rational explanation that considers the timing of purchases, and consumption and uncertainty about future personal demand. The transfer creates an “uncomfortable” level of inventory, and transfer recipients want to spend it down quickly, lest it lose its value. We discuss the implications of our study for digital platforms.


Filippas, Apostolos, John J. Horton, and Richard J. Zeckhauser. "The Surprisingly Low Cost of Free Goods: Evidence from a Field Experiment." November 4, 2023.