Opinion leaders, influence activities and leadership rents
[Konsumentenbeeinflussung und die Konsumentenrenten von Meinungsführern bei Produktinnovationen]
Consumers may observe previous consumers’ choices. They may follow their choices if they think these consumers are better informed. In turn, firms may concentrate on influencing the early consumers. This, in turn, changes the nature of early consumers’ choice behavior as a signal for other consumers. In this paper, I show that firms’ influence activities need not distort earlier consumers’ decisions, but may reduce the informative value of these decisions for other consumers if influence activities are noisy or if some firms have deep pockets and others are liquidity constrained.
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- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992.
"A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
- Grewal, Rajdeep & Mehta, Raj & Kardes, Frank R., 2000. "The role of the social-identity function of attitudes in consumer innovativeness and opinion leadership," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 233-252, June.
- Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November.
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