Market Diffusion with Consumer-Based Bilateral Learning
AbstractThis paper analyzes the market diffusion of a new product whose quality is uncertain. Consumers learn the product quality by observing the history of market outcomes. Firms cannot observe how consumers evaluate the product quality and learn it in response to consumerfs behavior. As a result of informational externalities, new entry occurs gradually. This dual uncertainty contributes to S-shaped diffusion of the new product with strictly declining prices.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-13.
Length: 25 pages
Date of creation: May 2009
Date of revision:
experience goods; quality uncertainty; bilateral learning; S-shaped diffusion.;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-23 (All new papers)
- NEP-COM-2009-05-23 (Industrial Competition)
- NEP-MIC-2009-05-23 (Microeconomics)
- NEP-MKT-2009-05-23 (Marketing)
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