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The Sound of Silence: Observational Learning in the U.S. Kidney Market

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  • Juanjuan Zhang

    () (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02114)

Abstract

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.

Suggested Citation

  • Juanjuan Zhang, 2010. "The Sound of Silence: Observational Learning in the U.S. Kidney Market," Marketing Science, INFORMS, vol. 29(2), pages 315-335, 03-04.
  • Handle: RePEc:inm:ormksc:v:29:y:2010:i:2:p:315-335
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    File URL: http://dx.doi.org/10.1287/mksc.1090.0500
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    Cited by:

    1. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    2. Shachat, Jason & Swarthout, J. Todd, 2012. "Learning about learning in games through experimental control of strategic interdependence," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 383-402.
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    4. David Godes, 2011. "Commentary--Invited Comment on "Opinion Leadership and Social Contagion in New Product Diffusion"," Marketing Science, INFORMS, vol. 30(2), pages 224-229, 03-04.
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    6. Xiaoqing Jing & Jinhong Xie, 2011. "Group Buying: A New Mechanism for Selling Through Social Interactions," Management Science, INFORMS, vol. 57(8), pages 1354-1372, August.
    7. Juanjuan Zhang & Peng Liu, 2012. "Rational Herding in Microloan Markets," Management Science, INFORMS, vol. 58(5), pages 892-912, May.
    8. Catherine Tucker & Juanjuan Zhang & Ting Zhu, 2013. "Days on market and home sales," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 337-360, June.
    9. Jin-Hyuk Kim & Peter Newberry & Calvin Qiu, 2015. "An Empirical Analysis of a Crowdfunding Platform," Working Papers 15-12, NET Institute.
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    12. Nathan Yang, 2011. "An Empirical Model of Industry Dynamics with Common Uncertainty and Learning from the Actions of Competitors," Working Papers 11-16, NET Institute.
    13. David Godes, 2012. "The Strategic Impact of References in Business Markets," Marketing Science, INFORMS, vol. 31(2), pages 257-276, March.
    14. repec:wyi:journl:002151 is not listed on IDEAS
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    18. Catherine Tucker & Juanjuan Zhang, 2011. "How Does Popularity Information Affect Choices? A Field Experiment," Management Science, INFORMS, vol. 57(5), pages 828-842, May.
    19. Dmitri Kuksov & Kangkang Wang, 2013. "A Model of the "It" Products in Fashion," Marketing Science, INFORMS, vol. 32(1), pages 51-69, July.
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