Market Diffusion with Two-Sided Learning
AbstractWe analyze the diffusion of a new product of uncertain value in a duopolistic market. Both sides of the market, buyers and sellers, learn the true value of the new product from experiments with it. Buyers have heterogeneous preferences over the products and sellers compete in prices. The pricing policies and market shares in the unique Markov-perfect equilibrium are obtained explicitly. The dynamics of the equilibrium market shares display excessive sales of the new product relative to the social optimum in early stages and too-low sales later on. The diffusion path of a successful product is S-shaped.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 28 (1997)
Issue (Month): 4 (Winter)
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Web page: http://www.rje.org
Other versions of this item:
- Dirk Bergemann & Juuso Valimaki, 1996. "Market Diffusion with Two-Sided Learning," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1138, Cowles Foundation for Research in Economics, Yale University.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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.:
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