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

  • Jonathan Beck

    ()

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

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File URL: http://hdl.handle.net/10.1007/s10824-006-9029-0
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Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 31 (2007)
Issue (Month): 1 (March)
Pages: 5-23

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Handle: RePEc:kap:jculte:v:31:y:2007:i:1:p:5-23
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100284

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  23. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-36, December.
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