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Advertising, Negative Word-of-Mouth, and Product Acceptance

Author

Listed:
  • Yaari, Gur

    () (Bar-Ilan University)

  • Solomon, Sorin

    () (Hebrew University of Jerusalem)

  • Deissenberg, Christophe

    () (Groupement de Recherche en Économie Quantitative d'Aix-Marseille (GREQAM) Aix-Marseille School of Economics (AMSE))

Abstract

With this paper, we suggest a general simulation framework to analyze the impact on the sales of a newly introduced product of (a) advertising; and (b) of (positive or negative) word-of-mouth in a market where numerous agents are interconnected through a socioeconomic network and provide their neighbors with subjective information about the quality of the product. The information transmitted by an agent is based on (i) advertising messages from the firm distributing the product, and/or (ii) on messages received from the agent's neighbors, and/or (iii) on first-hand experiences with the product. We investigate the effect of (1) the choice of quality; (2) of the choice of advertising message; and (3) of the network topology on the time profile of sales and on the cumulated actual sales. We find that actual sales remain typically below the theoretical market potential under full information and are (unless the product is of very low quality) decreasing in the advertised quality level. Furthermore, when the underlying social network has a high average path length, there is a sharp jump in the cumulated sales as the product quality reaches a given threshold.

Suggested Citation

  • Yaari, Gur & Solomon, Sorin & Deissenberg, Christophe, 2006. "Advertising, Negative Word-of-Mouth, and Product Acceptance," European Journal of Economic and Social Systems, Lavoisier, vol. 19(2), pages 257-268.
  • Handle: RePEc:ris:ejessy:0098
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    Cited by:

    1. G. Yaari & D. Stauffer & S. Solomon, 2008. "Intermittency and Localization," Papers 0802.3541, arXiv.org, revised Mar 2008.
    2. Solomon Sorin & Golo Natasa, 2013. "Minsky Financial Instability, Interscale Feedback, Percolation and Marshall–Walras Disequilibrium," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 167-260, October.

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