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A model of flops

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  • Patrick Hummel
  • John Morgan
  • Phillip C. Stocken

Abstract

type="main"> A firm surveys a large number of consumers, some of whom sincerely report their tastes and others of whom report strategically. It makes product decisions using the sample mean of survey responses. When firms and consumers agree on the fraction of sincere consumers, information loss is severe, and many products are flops as they poorly match consumer tastes. When beliefs differ, however, equilibrium is in linear strategies, and information aggregates. Despite this, flops still arise. A firm, however, can solve the flops problem by limiting the effect of strategic consumers. Binary surveys offer one such solution.

Suggested Citation

  • Patrick Hummel & John Morgan & Phillip C. Stocken, 2013. "A model of flops," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 585-609, December.
    • Handle: RePEc:bla:randje:v:44:y:2013:i:4:p:585-609
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    File URL: http://hdl.handle.net/10.1111/1756-2171.12032
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    References listed on IDEAS

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    1. Zibin Xu & Anthony Dukes, 2019. "Product Line Design Under Preference Uncertainty Using Aggregate Consumer Data," Marketing Science, INFORMS, vol. 38(4), pages 669-689, July.

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