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New product launch: herd seeking or herd preventing?

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Author Info

  • Ting Liu

    ()

  • Pasquale Schiraldi

    ()

Abstract

A decision maker offers a new product to a number of potential adopers. He does not know the value of the product, but adopers receive some private information about it. We study how the decision maker may influence learning among adopers by manipulaing the launch sequence when both the decision maker and adopers can learn about the value of the product from previous adoption decisions. The conditions under which the decision maker prefers a sequential launch to a simultaneous launch depend on adopers’ prior beliefs about the value of the product and adoption costs. We derive the decision maker’s optimal launch sequence and study how it endogenizes informational herding. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00199-011-0614-x
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 3 (November)
Pages: 627-648

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Handle: RePEc:spr:joecth:v:51:y:2012:i:3:p:627-648

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Related research

Keywords: Herding; Product launch sequence; Social learning; D8;

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References

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  6. David Gill & Daniel Sgroi, 2011. "The Optimal Choice of Pre-Launch Reviewer," Economics Series Working Papers 562, University of Oxford, Department of Economics.
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  8. Dirk Bergemann & Juuso Valimaki, 1999. "Experimentation in Markets," Cowles Foundation Discussion Papers 1214, Cowles Foundation for Research in Economics, Yale University.
  9. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2008. "Monopoly pricing in the binary herding model," Economic Theory, Springer, vol. 37(2), pages 203-241, November.
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  12. Gill, David & Sgroi, Daniel, 2008. "Sequential decisions with tests," Games and Economic Behavior, Elsevier, vol. 63(2), pages 663-678, July.
  13. Sgroi, Daniel, 2002. "Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare," Games and Economic Behavior, Elsevier, vol. 39(1), pages 137-166, April.
  14. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
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  16. repec:rje:randje:v:37:y:2006:i:4:p:910-928 is not listed on IDEAS
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Citations

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Cited by:
  1. Ting Liu & Pasquale Schiraldi, 2012. "Buying frenzies in durable-goods markets," Department of Economics Working Papers 12-07, Stony Brook University, Department of Economics.
  2. Pier-Andre Bouchard St-Amant, 2013. "Externalities, Social Value and Word of Mouth: Notions of Public Economics on Networks," Working Papers 1301, Queen's University, Department of Economics.
  3. Alexei Parakhonyak & Nick Vikander, 2013. "Optimal Sales Schemes for Network Goods," Discussion Papers 13-11, University of Copenhagen. Department of Economics.
  4. Pier-André Bouchard St-Amant, 2012. "Getting the Right Spin: A Theory of Value of Social Networks," Working Papers 1293, Queen's University, Department of Economics.

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