The Sound of Silence: Observational Learning in the U.S. Kidney Market
Mere observation of others' choices can be informative about product quality. This paper develops an individual-level dynamic model of observational learning and applies it to a novel data set from the U.S. kidney market, where transplant candidates on a waiting list sequentially decide whether to accept a kidney offer. We find strong evidence of observational learning: patients draw negative quality inferences from earlier refusals in the queue, thus becoming more inclined towards refusal themselves. This self-reinforcing chain of inferences leads to poor kidney utilization despite the continual shortage in kidney supply. Counterfactual policy simulations show that patients would have made more efficient use of kidneys had the concerns behind earlier refusals been shared. This study yields a set of marketing implications. In particular, we show that observational learning and information sharing shape consumer choices in markedly different ways. Optimal marketing strategies should take into account how consumers learn from others.
Volume (Year): 29 (2010)
Issue (Month): 2 (03-04)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
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.:
- Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
- Dmitri Kuksov, 2007. "Brand Value in Social Interaction," Management Science, INFORMS, vol. 53(10), pages 1634-1644, October.
- Chakravarthi Narasimhan, 1989. "Incorporating Consumer Price Expectations in Diffusion Models," Marketing Science, INFORMS, vol. 8(4), pages 343-357.
- Baohong Sun & Jinhong Xie & H. Henry Cao, 2004. "Product Strategy for Innovators in Markets with Network Effects," Marketing Science, INFORMS, vol. 23(2), pages 243-254, October.
- Glenn Ellison & Drew Fudenberg, 1995.
"Word-of-Mouth Communication and Social Learning,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 110(1), pages 93-125.
- Fudenberg, Drew & Ellison, Glenn, 1995. "Word-of-Mouth Communication and Social Learning," Scholarly Articles 3196300, Harvard University Department of Economics.
- A. Banerjee & Drew Fudenberg, 2010. "Word-of-Mouth Communication and Social Learning," Levine's Working Paper Archive 425, David K. Levine.
- Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
- Wernerfelt, Birger, 1995. " A Rational Reconstruction of the Compromise Effect: Using Market Data to Infer Utilities," Journal of Consumer Research, Oxford University Press, vol. 21(4), pages 627-633, March.
- Xuanming Su & Stefanos Zenios, 2004. "Patient Choice in Kidney Allocation: The Role of the Queueing Discipline," Manufacturing & Service Operations Management, INFORMS, vol. 6(4), pages 280-301, June.
- Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
- Günter J. Hitsch, 2006. "An Empirical Model of Optimal Dynamic Product Launch and Exit Under Demand Uncertainty," Marketing Science, INFORMS, vol. 25(1), pages 25-50, 01-02.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
- Harikesh Nair & Pradeep Chintagunta & Jean-Pierre Dubé, 2004. "Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants," Quantitative Marketing and Economics (QME), Springer, vol. 2(1), pages 23-58, 03.
- Nair, Harikesh S. & Chintagunta, Pradeep & Dube, Jean-Pierre, 2003. "Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants," Research Papers 1948, Stanford University, Graduate School of Business.
- Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
- Puneet Manchanda & Ying Xie & Nara Youn, 2008. "The Role of Targeted Communication and Contagion in Product Adoption," Marketing Science, INFORMS, vol. 27(6), pages 961-976, 11-12.
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
- Liang Guo & Ying Zhao, 2009. "Voluntary Quality Disclosure and Market Interaction," Marketing Science, INFORMS, vol. 28(3), pages 488-501, 05-06.
- J. Miguel Villas-Boas, 2004. "Consumer Learning, Brand Loyalty, and Competition," Marketing Science, INFORMS, vol. 23(1), pages 134-145, December.
- Dan Horsky & Leonard S. Simon, 1983. "Advertising and the Diffusion of New Products," Marketing Science, INFORMS, vol. 2(1), pages 1-17.
- Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
- Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
- Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
- Pradeep Chintagunta & Tülin Erdem & Peter E. Rossi & Michel Wedel, 2006. "Structural Modeling in Marketing: Review and Assessment," Marketing Science, INFORMS, vol. 25(6), pages 604-616, 11-12.
- J. Miguel Villas-Boas, 2006. "Dynamic Competition with Experience Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 37-66, 03.
- Sridhar Narayanan & Pradeep Chintagunta & Eugenio Miravete, 2007. "The role of self selection, usage uncertainty and learning in the demand for local telephone service," Quantitative Marketing and Economics (QME), Springer, vol. 5(1), pages 1-34, March.
- Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
- Preyas S. Desai, 2000. "Multiple Messages to Retain Retailers: Signaling New Product Demand," Marketing Science, INFORMS, vol. 19(4), pages 381-389, August.
- Peter N. Golder & Gerard J. Tellis, 2004. "Growing, Growing, Gone: Cascades, Diffusion, and Turning Points in the Product Life Cycle," Marketing Science, INFORMS, vol. 23(2), pages 207-218, December.
- David Godes & Dina Mayzlin, 2004. "Using Online Conversations to Study Word-of-Mouth Communication," Marketing Science, INFORMS, vol. 23(4), pages 545-560, June.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
- Eric T. Anderson & Duncan I. Simester, 2001. "Price Discrimination as an Adverse Signal: Why an Offer to Spread Payments May Hurt Demand," Marketing Science, INFORMS, vol. 20(3), pages 315-327, November.
- Sridhar Moorthy & Kannan Srinivasan, 1995. "Signaling Quality with a Money-Back Guarantee: The Role of Transaction Costs," Marketing Science, INFORMS, vol. 14(4), pages 442-466.
- Coscelli, Andrea & Shum, Matthew, 2004. "An empirical model of learning and patient spillovers in new drug entry," Journal of Econometrics, Elsevier, vol. 122(2), pages 213-246, October.
- J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:29:y:2010:i:2:p:315-335. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.