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

Listed author(s):
  • Gill, D.
  • Sgroi, D.

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.

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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0334.

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Length: 62
Date of creation: Jul 2003
Handle: RePEc:cam:camdae:0334
Note: IO, ET
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