Product Launches with Biased Reviewers: The Importance of Not Being Earnest
AbstractThe 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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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0334.
Date of creation: Jul 2003
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bias; herding; reviewers; sequential sales;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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- NEP-ALL-2003-07-29 (All new papers)
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- Olivier Gossner & Nicolas Melissas, 2004. "Informational Cascades Elicit Private Information," CIG Working Papers SP II 2004-19, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- David Gill & Daniel Sgroi, 2005.
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