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Popularity and Debut

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  • Christian Dahl Winther

    ()
    (School of Economics and Management, University of Aarhus, Denmark)

Abstract

This paper focuses on the impact of brand popularity on two firms’ optimal entry strategies into an emerging industry. Brand popularity shows the proportion of consumers holding an affinity towards one firm’s product or the other. Word of mouth effects influence the distribution of preferences between periods, in turn expected profits. I show that differences in popularity give firms dissimilar incentives to lead or to follow, which affects their strategic choices of timing of entry when fast introduction is costly. I study the subgame perfect equilibria of the game to observe how they connect to popularity, strength of word of mouth communication, and consumer heterogeneity. The paper shows for which markets the asymmetry in the duopoly should be expected to increase or decrease. The model is extended to study how pre-ordering influences the efficiency of the industry.

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File URL: ftp://ftp.econ.au.dk/afn/wp/08/wp08_02.pdf
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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2008-02.

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Length: 31
Date of creation: 17 Jan 2008
Date of revision:
Handle: RePEc:aah:aarhec:2008-02

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Product differentiation; product introduction; technological change; word of mouth communication;

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  1. Joseph Farrell and Garth Saloner., 1987. "Coordination Through Committees and Markets," Economics Working Papers 8740, University of California at Berkeley.
  2. Ellison, Glenn & Fudenberg, Drew, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 93-125, February.
  3. Choi, Jay Pil & Thum, Marcel, 1998. "Market structure and the timing of technology adoption with network externalities," European Economic Review, Elsevier, vol. 42(2), pages 225-244, February.
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