``We sold a million copies''-The role of advertising past sales
AbstractWe model a two periods market with two-sided quality uncertainty. In the first period the seller gathers information about consumers' tastes upon observing his sales. In the second period the seller may or may not deliver the information. If the monopolist must commit either to reveal or conceal past-sales before observing them, commiting to reveal is the dominant strategy whenever advertising cost is low, buyers are many and their private information is accurate. When the seller can postpone the 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 EconWPA in its series Industrial Organization with number 9812001.
Length: 20 pages
Date of creation: 08 Dec 1998
Date of revision:
Note: Type of Document - Postscript file; prepared on IBM PC - PC- TEX/Latex; to print on HP/PostScript/; pages: 20 ; figures: request from author/
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two-sided quality uncertainty; past-sales advertising; herding behaviour;
Other versions of this item:
- Paulo Klinger Monteiro & José Luis Moraga-González, 1999. ""We sold a million copies" - The Role of Advertising Past Sales," CIE Discussion Papers 1999-03, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- 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
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