Firms dealing in experiential products such as newspapers, wine or ski resorts face a dilemma. Key attributes of their products are beyond their control - they cannot direct the events of the day, the growing season or snowfall. As a result, consumers don't know the exact content of the products before they purchase them. This has ramifications for how such firms compete for customers.

Yi Xiang of HKUST and David A. Soberman look at the role of previews in a competitive situation. Previews provide consumers with information that allows them to assess the products before they buy, such as the front page of a newspaper, a special website on new wines or a webcam installed at a ski resort. However, some previews are clearly more informative than others and the authors wanted to find out the motivations and implications in employing different preview strategies. They focus in particular on newspapers.

"We want to find out why firms use different strategies when the product content is not fully controlled. Why do some newspapers have front pages that efficiently tell potential buyers what is inside, whereas others have a format that makes it difficult to know without inspecting the product in details?" they say.

Competitive factors seem to be at work here and they point to evidence that in cities with more than one local newspaper, the competition is nearly always between a traditional broadsheet and a tabloid - whose front pages are essentially previews of the content within.

They devise a model to try to explain this phenomenon, with implications for other experiential products.

The model is based on competition between two firms targeting the same market. Previews, such as the design of the front page, are designed before pricing decisions and content are known, and are considered long-term strategic decisions. The decision to preview, and the depth of information provided, depend on competition. If the firm has a monopoly, it does not need to expend many resources on previews.

But with competition comes an incentive to preview a product in a way that attracts potential buyers. If the competitor responds with a preview of its own, the degree of informativeness of the two previews can affect the nature of their competition. If they are both similarly informative, price competition will intensify because this becomes the main way they can differentiate themselves.

However, when they are focused on different segments of the market, the decision of one firm to offer an informative preview can actually benefit a competitor that chooses not to follow suit. This is because, according to the model, less than half the market will prefer the informative preview, thereby leaving the rest of the market open to the competitor.

"In a competitive context, when one firm provides an informative preview, both firms realize a significant benefit. Surprisingly, the firm that benefits most is the one that doesn't provide informative previews," the authors say.

"This is because previews are a tool that simultaneously differentiates a product but also confers a positive externality on a competitor that is less explicit about its content."

Their model further shows that this outcome can apply even when firms set prices after knowing the content, for example for a special edition of a newspaper, and when the preview decision is made after knowing the content, for example a winery that promotes a wine after receiving the product.

The model does have limitations though: it focuses on existing customers rather than attracting new ones, it considers a situation where consumers pay for each issue unit or newspaper rather than taking out a long-term subscription, it doesn't consider other motivations behind the design of a front page and it doesn't consider competition based on quality. These all merit further investigation, the authors add.