Market Diffusion with Consumer-Based Bilateral Learning
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.
|Date of creation:||May 2009|
|Date of revision:||Sep 2011|
|Contact details of provider:|| Web page: http://www2.econ.osaka-u.ac.jp/library/global/e_HP/e_g_shiryo.html|
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- 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.
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