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.
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An earlier version of this paper was circulated under the title “Monopoly’s New Product Launch Straegy: herd seeking or herd prevening?” We are very grateful to Ching-to Albert Ma, Jacob Glazer, Barton Lipman, Christophe Chamley, Thomas Jeitschko, Heski Bar-Isaac, Daniel Sgroi and participants at the Microeconomics Theory Workshop at Boston University. We also thank Johannes Hörner and an anonymous referee for their valuable suggestions.
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Liu, T., Schiraldi, P. New product launch: herd seeking or herd preventing?. Econ Theory 51, 627–648 (2012). https://doi.org/10.1007/s00199-011-0614-x
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DOI: https://doi.org/10.1007/s00199-011-0614-x