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The sales effect of word of mouth: a model for creative goods and estimates for novels

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  • Jonathan Beck

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Abstract

Weekly sales of creative goods—like music records, movies, or books—usually peak shortly after release and then decline quickly. In many cases, however, they follow a hump-shaped pattern where sales increase for some time. A popular explanation for this phenomenon is word of mouth among a population of heterogeneous buyers, but previous studies typically assume buyer homogeneity or neglect word of mouth altogether. In this paper, I study a model of new-product diffusion with heterogeneous buyers that allows for a quantification of the sales effect of word of mouth. The model includes Christmas sales as a special case. All parameters have an intuitive interpretation. Simulation results suggest that the parameters are estimable for data that are not too volatile and that cover a sufficiently large part of a title’s life cycle. I estimate the model for four exemplary novels using scanner data on weekly sales. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Jonathan Beck, 2007. "The sales effect of word of mouth: a model for creative goods and estimates for novels," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 31(1), pages 5-23, March.
  • Handle: RePEc:kap:jculte:v:31:y:2007:i:1:p:5-23 DOI: 10.1007/s10824-006-9029-0
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    Cited by:

    1. Schaffner, Florian, 2016. "Information transmission in high dimensional choice problems: The value of online ratings in the restaurant market," Annual Conference 2016 (Augsburg): Demographic Change 145585, Verein für Socialpolitik / German Economic Association.
    2. Beck, Jonathan, 2008. "Diderot´s rule," Discussion Papers, Research Unit: Competition and Innovation SP II 2008-13, Social Science Research Center Berlin (WZB).
    3. Luca Aguzzoni & Elena Argentesi & Lorenzo Ciari & Tomaso Duso & Massimo Tognoni, 2016. "Ex post Merger Evaluation in the U.K. Retail Market for Books," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 170-200, March.
    4. Gaffeo, Edoardo & Scorcu, Antonello E. & Vici, Laura, 2008. "Demand distribution dynamics in creative industries: The market for books in Italy," Information Economics and Policy, Elsevier, vol. 20(3), pages 257-268, September.
    5. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, pages 980-1006.
    6. Edlira Shehu & Tim Prostka & Christina Schmidt-Stölting & Michel Clement & Eva Blömeke, 2014. "The influence of book advertising on sales in the German fiction book market," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, pages 109-130.
    7. John Ashworth & Bruno Heyndels & Kristien Werck, 2010. "Expert judgements and the demand for novels in Flanders," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, pages 197-218.
    8. Ohio University & Department of Economics & Hailey Hayeon Joo, 2009. "Social Learning and Optimal Advertising in the Motion Picture Industry," 2009 Meeting Papers 513, Society for Economic Dynamics.
    9. Jason Potts & Stuart Cunningham & John Hartley & Paul Ormerod, 2008. "Social network markets: a new definition of the creative industries," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(3), pages 167-185, September.
    10. Khim Yong, Goh & Kai-Lung, Hui & I.P.L., Png, 2008. "Social Interaction, Observational Learning, and Privacy: the "Do Not Call" Registry," MPRA Paper 8225, University Library of Munich, Germany.
    11. Jonathan Beck, 2007. "The sales effect of word of mouth: a model for creative goods and estimates for novels," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, pages 5-23.
    12. Christophe Van den Bulte & Yogesh V. Joshi, 2007. "New Product Diffusion with Influentials and Imitators," Marketing Science, INFORMS, vol. 26(3), pages 400-421, 05-06.
    13. Delphine Irac & Claire Célérier & Philippe Askenazy, 2010. "Vente à distance, internet et dynamiques des prix," Économie et Prévision, Programme National Persée, pages 1-13.
    14. Fabrice Rochelandet & Mohamed El Hédi Arouri & Fabrice Le Guel, 2010. "L'entrelacement des pratiques culturelles et de l'usage des TIC : une analyse économique," Economie & Prévision, La Documentation Française, pages 33-55.
    15. Fernández Blanco, Víctor & Prieto Rodríguez,Juan, 2009. "Análisis de los hábitos de lectura como una decisión económica/," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 27, pages 113-138, Abril.

    More about this item

    Keywords

    New-product diffusion; Word of mouth; Creative industries; C22; L82; M3;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • I - Health, Education, and Welfare
    • I - Health, Education, and Welfare
    • I - Health, Education, and Welfare

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