"We sold a million copies" - The Role of Advertising Past Sales
AbstractWe model a two period monopoly market with two-sided quality uncertainty. In first period, seller gathers information about consumers´ tastes upon observing its sales. In second period, seller may or may not deliver the information. If monopolist must commit either to reveal or conceal past-sales before observing them, committing to reveal is the dominant strategy whenever advertising cost is low, buyers are many and their private information is accurate. When seller can postpone advertising decision and gains experience, past-sales revelation occurs partially. In equilibrium, delivery of sales-data occurs to induce some buyers´ herding behaviour. We carry out the analysis for two different informational scenarios.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1999-03.
Length: 23 pages
Date of creation: Feb 1999
Date of revision:
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More information through EDIRC
two-sided quality uncertainty; past-sales advertising; herding behaviour;
Other versions of this item:
- P. K. Monteiro & J. L. Moraga, 1998. "``We sold a million copies''-The role of advertising past sales," Industrial Organization 9812001, EconWPA.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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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