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Market Diffusion with Consumer-Based Bilateral Learning

Author

Listed:
  • Hiroshi Kitamura

    () (Faculty of Economics, Sapporo Gakuin University)

  • Akira Miyaoka

    () (Graduate School of Economics, Osaka University)

Abstract

This paper analyzes the market diffusion of a new product whose quality is uncertain. Consumers learn the product quality by observing the history of market outcomes. Firms cannot observe how consumers evaluate the product quality; instead, they learn by observing consumer behavior. New entry occurs gradually because of informational externalities. This dual uncertainty contributes to an S-shaped diffusion of the new product with declining prices.

Suggested Citation

  • Hiroshi Kitamura & Akira Miyaoka, 2009. "Market Diffusion with Consumer-Based Bilateral Learning," Discussion Papers in Economics and Business 09-13-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Sep 2011.
  • Handle: RePEc:osk:wpaper:0913r
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0913R.pdf
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    References listed on IDEAS

    as
    1. Dirk Bergemann & Juuso Valimaki, 1997. "Market Diffusion with Two-Sided Learning," RAND Journal of Economics, The RAND Corporation, pages 773-795.
    2. Dirk Bergemann & Juuso Valimaki, 1997. "Market Diffusion with Two-Sided Learning," RAND Journal of Economics, The RAND Corporation, pages 773-795.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Experience Goods; Quality Uncertainty; Bilateral Learning; S-shaped Diffusion.;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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