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The sales effect of word of mouth: a model for creative goods and estimates for novels

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Author Info
Jonathan Beck ()

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Abstract

Weekly sales of creative goods—like music records, movies, or books—usually peak shortly after release and then decline quickly. In many cases, however, they follow a hump-shaped pattern where sales increase for some time. A popular explanation for this phenomenon is word of mouth among a population of heterogeneous buyers, but previous studies typically assume buyer homogeneity or neglect word of mouth altogether. In this paper, I study a model of new-product diffusion with heterogeneous buyers that allows for a quantification of the sales effect of word of mouth. The model includes Christmas sales as a special case. All parameters have an intuitive interpretation. Simulation results suggest that the parameters are estimable for data that are not too volatile and that cover a sufficiently large part of a title’s life cycle. I estimate the model for four exemplary novels using scanner data on weekly sales. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s10824-006-9029-0
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Publisher Info
Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 31 (2007)
Issue (Month): 1 (March)
Pages: 5-23
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:jculte:v:31:y:2007:i:1:p:5-23

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Web page: http://www.springerlink.com/link.asp?id=100284

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Related research
Keywords: New-product diffusion; Word of mouth; Creative industries; C22; L82; M3;

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Find related papers by JEL classification:
I - Health, Education, and Welfare
I - Health, Education, and Welfare

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bronwyn H. Hall & Beethika Khan, 2003. "Adoption of New Technology," NBER Working Papers 9730, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Judith A. Chevalier & Dina Mayzlin, 2003. "The Effect of Word of Mouth on Sales: Online Book Reviews," NBER Working Papers 10148, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Jonathan Beck, 2004. "Fixed, Focal, Fair? Book Prices Under Optional Resale Price Maintenance," CIG Working Papers SP II 2004-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
  4. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April. [Downloadable!] (restricted)
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  5. De Vany, Arthur S. & Walls, W. David, 2004. "Motion picture profit, the stable Paretian hypothesis, and the curse of the superstar," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1035-1057, March. [Downloadable!] (restricted)
  6. Trajtenberg, Manuel & Yitzhaki, Shlomo, 1989. "The Diffusion of Innovations: A Methodological Reappraisal," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(1), pages 35-47, January.
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  7. Boswijk, H. Peter & Franses, Philip Hans, 2005. "On the Econometrics of the Bass Diffusion Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 255-268, July. [Downloadable!] (restricted)
  8. Marcel F. M. Canoy & Jan C. van Ours & Frederick van der Ploeg, 2005. "The Economics of Books," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  9. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-36, December. [Downloadable!] (restricted)
  10. De Vany, Arthur & Walls, W David, 1996. "Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry," Economic Journal, Royal Economic Society, vol. 106(439), pages 1493-1514, November. [Downloadable!] (restricted)
  11. Jonathan Beck, 2006. "The Sales Effect of Word of Mouth: A Model for Creative Goods and Estimates for Novels," CIG Working Papers SP II 2006-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Khim Yong, Goh & Kai-Lung, Hui & I.P.L. , Png, 2008. "Social Interaction, Observational Learning, and Privacy: the "Do Not Call" Registry," MPRA Paper 8225, University Library of Munich, Germany. [Downloadable!]
  2. Jason Potts & Stuart Cunningham & John Hartley & Paul Ormerod, 2008. "Social network markets: a new definition of the creative industries," Journal of Cultural Economics, Springer, vol. 32(3), pages 167-185, September. [Downloadable!] (restricted)
  3. Beck, Jonathan, 2009. "Diderot's rule," MPRA Paper 17404, University Library of Munich, Germany. [Downloadable!]
  4. Edoardo Gaffeo & Antonello E. Scorci & Laura Vici, 2008. "Demand Distribution Dynamics in Creative Industries: the Market for Books in Italy," Department of Economics Working Papers 0804, Department of Economics, University of Trento, Italia. [Downloadable!]
  5. Seaman, Bruce A., 2009. "Cultural Economics: The State of the Art and Perspectives/Economía de la cultura: estado del arte y perspectivas," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 27, Abril. [Downloadable!] (restricted)
  6. Jonathan Beck, 2007. "The sales effect of word of mouth: a model for creative goods and estimates for novels," Journal of Cultural Economics, Springer, vol. 31(1), pages 5-23, March. [Downloadable!] (restricted)
    Other versions:
  7. E. Gaffeo & A. E. Scorcu & L. Vici, 2008. "Demand Distribution Dynamics in Creative Industries: the Market for Books in Italy," Working Papers 630, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
    Other versions:
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