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New product launch: herd seeking or herd preventing?

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  • Ting Liu
  • Pasquale Schiraldi

Abstract

A decision maker offers a new product to a number of potential adopers. He does not know the value of the product, but adopers receive some private information about it. We study how the decision maker may influence learning among adopers by manipulaing the launch sequence when both the decision maker and adopers can learn about the value of the product from previous adoption decisions. The conditions under which the decision maker prefers a sequential launch to a simultaneous launch depend on adopers’ prior beliefs about the value of the product and adoption costs. We derive the decision maker’s optimal launch sequence and study how it endogenizes informational herding. Copyright Springer-Verlag 2012

Suggested Citation

  • Ting Liu & Pasquale Schiraldi, 2012. "New product launch: herd seeking or herd preventing?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(3), pages 627-648, November.
    • Handle: RePEc:spr:joecth:v:51:y:2012:i:3:p:627-648
    DOI: 10.1007/s00199-011-0614-x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nicolás Figueroa & Carla Guadalupi, 2017. "Convincing early adopters: Price signals and Information transmission," Documentos de Trabajo 486, Instituto de Economia. Pontificia Universidad Católica de Chile..
    2. Nicolás Figueroa & Carla Guadalupi, 2020. "Signaling Quality in the Presence of Observational Learning," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(3), pages 515-534, May.
    3. Bin Shen & Ming Cheng & Renlong He & Minglei Yang, 2024. "Selling through social media influencers in influencer marketing: participation-based contract versus sales-based contract," Electronic Commerce Research, Springer, vol. 24(2), pages 1095-1118, June.
    4. Alexei Parahonyak & Nick Vikander, 2024. "Strategic Use of Product Delays to Shape Word-of-Mouth Communication," Economics Series Working Papers 1032, University of Oxford, Department of Economics.
    5. Amy Wenxuan Ding & Shibo Li, 2019. "Herding in the consumption and purchase of digital goods and moderators of the herding bias," Journal of the Academy of Marketing Science, Springer, vol. 47(3), pages 460-478, May.
    6. Yiangos Papanastasiou, 2020. "Newsvendor Decisions with Two-Sided Learning," Management Science, INFORMS, vol. 66(11), pages 5408-5426, November.
    7. Liu, Ting & Schiraldi, Pasquale, 2014. "Buying frenzies in durable-goods markets," European Economic Review, Elsevier, vol. 70(C), pages 1-16.
    8. Alexei Parakhonyak & Nick Vikander, 2019. "Optimal Sales Schemes for Network Goods," Management Science, INFORMS, vol. 65(2), pages 819-841, February.
    9. Zhang, Qiao & Tang, Wansheng & Zaccour, Georges & Zhang, Jianxiong, 2019. "Should a manufacturer give up pricing power in a vertical information-sharing channel?," European Journal of Operational Research, Elsevier, vol. 276(3), pages 910-928.
    10. Jiang, Zhong-Zhong & Zhao, Jinlong & Zhang, Yinghao & Yi, Zelong, 2022. "Unraveling the cheap talk’s informativeness of product quality in supply chains: A lying aversion perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 166(C).
    11. Pier-Andre Bouchard St-Amant, 2012. "Getting The Right Spin: A Theory Of Value Of Social Networks," Working Paper 1293, Economics Department, Queen's University.
    12. Xin Yan & Xiaohua Han, 2022. "Optimal pricing and remanufacturing entry strategies of manufacturers in the presence of online reviews," Annals of Operations Research, Springer, vol. 316(1), pages 59-92, September.
    13. Hattori, Keisuke & Zennyo, Yusuke, 2018. "Heterogeneous Consumer Expectations and Monopoly Pricing for Durables with Network Externalities," MPRA Paper 89893, University Library of Munich, Germany, revised 08 Nov 2018.
    14. Man Yu & Laurens Debo & Roman Kapuscinski, 2016. "Strategic Waiting for Consumer-Generated Quality Information: Dynamic Pricing of New Experience Goods," Management Science, INFORMS, vol. 62(2), pages 410-435, February.
    15. Ludmila Matyskova & Jan Sipek, 2017. "Manipulation of Cursed Beliefs in Online Reviews," CERGE-EI Working Papers wp586, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    16. Aleksei Smirnov & Egor Starkov, 2022. "Bad News Turned Good: Reversal under Censorship," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 506-560, May.
    17. James D. Campbell, 2015. "Localized price promotions as a quality signal in a publicly observable network," Quantitative Marketing and Economics (QME), Springer, vol. 13(1), pages 27-57, March.
    18. Pier-Andre Bouchard St-Amant, 2013. "Externalities Social Value And Word Of Mouth," Working Paper 1301, Economics Department, Queen's University.

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    More about this item

    Keywords

    Herding; Product launch sequence; Social learning; D8;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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