Popularity and Debut
This paper focuses on the impact of brand popularity on two firms’ optimal entry strategies into an emerging industry. Brand popularity shows the proportion of consumers holding an affinity towards one firm’s product or the other. Word of mouth effects influence the distribution of preferences between periods, in turn expected profits. I show that differences in popularity give firms dissimilar incentives to lead or to follow, which affects their strategic choices of timing of entry when fast introduction is costly. I study the subgame perfect equilibria of the game to observe how they connect to popularity, strength of word of mouth communication, and consumer heterogeneity. The paper shows for which markets the asymmetry in the duopoly should be expected to increase or decrease. The model is extended to study how pre-ordering influences the efficiency of the industry.
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| Length: | 31 |
| Date of creation: | 17 Jan 2008 |
| Date of revision: | |
| Handle: | RePEc:aah:aarhec:2008-02 |
| Contact details of provider: | Web page: http://www.econ.au.dk/afn/
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph Farrell & Garth Saloner, 1988.
"Coordination through Committees and Markets,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(2), pages 235-252, Summer.
- Joseph Farrell and Garth Saloner., 1988. "Coordination through Committees and Markets," Economics Working Papers 8864, University of California at Berkeley.
- Joseph Farrell and Garth Saloner., 1987. "Coordination Through Committees and Markets," Economics Working Papers 8740, University of California at Berkeley.
- Farrell, Joseph & Saloner, Garth, 1987. "Coordination Through Committees and Markets," Department of Economics, Working Paper Series qt5sn4b6v4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Farrell, Joseph & Saloner, Garth, 1988. "Coordination Through Committees and Markets," Department of Economics, Working Paper Series qt08w115vq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- A. Banerjee & Drew Fudenberg, 2010.
"Word-of-Mouth Communication and Social Learning,"
Levine's Working Paper Archive
425, David K. Levine.
- Glenn Ellison & Drew Fudenberg, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 93-125.
- Fudenberg, Drew & Ellison, Glenn, 1995. "Word-of-Mouth Communication and Social Learning," Scholarly Articles 3196300, Harvard University Department of Economics.
- Choi, Jay Pil & Thum, Marcel, 1998. "Market structure and the timing of technology adoption with network externalities," European Economic Review, Elsevier, vol. 42(2), pages 225-244, February.
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