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Product Launches with Biased Reviewers: The Importance of Not Being Earnest

Author

Listed:
  • Gill, D.
  • Sgroi, D.

Abstract

The standard simple sequential herding model is altered to allow a firm with a new product to have it reviewed publicly before launch. Reviewers are either inherently pessimistic, optimistic or unbiased. We find the counter-intuitive result that a firm with a good product will prefer a pessimistic reviewer. Although firms with a bad product prefer unbiased reviewers, signalling considerations will force them to copy the choice of the good product firm in order to avoid revealing product type. This asymmetric impact provides a strong explanation for the stylized fact that reviewers are often viewed as being very critical.

Suggested Citation

  • Gill, D. & Sgroi, D., 2003. "Product Launches with Biased Reviewers: The Importance of Not Being Earnest," Cambridge Working Papers in Economics 0334, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0334
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe0334.pdf
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    Cited by:

    1. Olivier Gossner & Nicolas Melissas, 2006. "Informational Cascades Elicit Private Information ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 297-325, February.
    2. Gill, David & Sgroi, Daniel, 2008. "Sequential decisions with tests," Games and Economic Behavior, Elsevier, vol. 63(2), pages 663-678, July.

    More about this item

    Keywords

    bias; herding; reviewers; sequential sales;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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