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New product launch: herd seeking or herd preventing?

  • Ting Liu

    ()

  • Pasquale Schiraldi

    ()

A decision maker offers a new product to a number of potential adopers. He does not know the value of the product, but adopers receive some private information about it. We study how the decision maker may influence learning among adopers by manipulaing the launch sequence when both the decision maker and adopers can learn about the value of the product from previous adoption decisions. The conditions under which the decision maker prefers a sequential launch to a simultaneous launch depend on adopers’ prior beliefs about the value of the product and adoption costs. We derive the decision maker’s optimal launch sequence and study how it endogenizes informational herding. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00199-011-0614-x
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Article provided by Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 3 (November)
Pages: 627-648

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Handle: RePEc:spr:joecth:v:51:y:2012:i:3:p:627-648
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  1. Dirk Bergemann & Juuso Valimaki, 1999. "Experimentation in Markets," Cowles Foundation Discussion Papers 1214, Cowles Foundation for Research in Economics, Yale University.
  2. 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.
  3. Sgroi, Daniel, 2002. "Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare," Games and Economic Behavior, Elsevier, vol. 39(1), pages 137-166, April.
  4. Giuseppe Moscarin & Marco Ottaviani & Lones Smith, . "Social Learning in a Changing World," ELSE working papers 010, ESRC Centre on Economics Learning and Social Evolution.
  5. Gill, David & Sgroi, Daniel, 2012. "The optimal choice of pre-launch reviewer," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1247-1260.
  6. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2008. "Monopoly pricing in the binary herding model," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 37(2), pages 203-241, November.
  7. Boğaçhan Çelen & Shachar Kariv, 2005. "An experimental test of observational learning under imperfect information," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 677-699, October.
  8. Dirk Bergemann & Juuso Valimaki, 1997. "Market Diffusion with Two-Sided Learning," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 773-795, Winter.
  9. Marco Ottaviani, 2000. "The Value of Public Information in Monopoly," Econometric Society World Congress 2000 Contributed Papers 1479, Econometric Society.
  10. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
  11. Gill, David & Sgroi, Daniel, 2008. "Sequential decisions with tests," Games and Economic Behavior, Elsevier, vol. 63(2), pages 663-678, July.
  12. Bergemann, Dirk & Valimaki, Juuso, 1996. "Learning and Strategic Pricing," Econometrica, Econometric Society, vol. 64(5), pages 1125-49, September.
  13. repec:rje:randje:v:37:y:2006:i:4:p:910-928 is not listed on IDEAS
  14. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  15. Curtis R. Taylor, 1999. "Time-on-the-Market as a Sign of Quality," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 555-578.
  16. Carlos Oyarzun & Johannes Ruf, 2009. "Monotone imitation," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 41(3), pages 411-441, December.
  17. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2006. "Dynamic monopoly pricing and herding," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 910-928, December.
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