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Market Diffusion with Consumer-Based Bilateral Learning

Author

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  • Hiroshi Kitamura

    (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 and learn it in response to consumer fs behavior. As a result of informational externalities, new entry occurs gradually. This dual uncertainty contributes to S-shaped diffusion of the new product with strictly declining prices.

Suggested Citation

  • Hiroshi Kitamura, 2009. "Market Diffusion with Consumer-Based Bilateral Learning," Discussion Papers in Economics and Business 09-13, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0913
    as

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    More about this item

    Keywords

    experience goods; quality uncertainty; bilateral learning; S-shaped diffusion.;
    All these keywords.

    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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