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Product Launches with Biased Reviewers: The Importance of Not Being Earnest

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  • Gill, D.
  • Sgroi, D.

Abstract

The standard simple sequential herding model is altered to allow a firm with a new product to have it reviewed publicly before launch. Reviewers are either inherently pessimistic, optimistic or unbiased. We find the counter-intuitive result that a firm with a good product will prefer a pessimistic reviewer. Although firms with a bad product prefer unbiased reviewers, signalling considerations will force them to copy the choice of the good product firm in order to avoid revealing product type. This asymmetric impact provides a strong explanation for the stylized fact that reviewers are often viewed as being very critical.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0334.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0334.

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Length: 62
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:cam:camdae:0334

Note: IO, ET
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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: bias; herding; reviewers; sequential sales;

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Cited by:
  1. Olivier Gossner & Nicolas Melissas, 2006. "Informational Cascades Elicit Private Information ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 297-325, 02.
  2. Gill, David & Sgroi, Daniel, 2008. "Sequential decisions with tests," Games and Economic Behavior, Elsevier, vol. 63(2), pages 663-678, July.

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