Sellouts, Beliefs, and Bandwagon Behavior

Nick Vikander

No 14-15, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper examines how a firm can strategically use sellouts to influence beliefs about its good's popularity. A monopolist faces a market of conformist consumers, whose willingness to pay is increasing in their beliefs about aggregate demand. Consumers are broadly rational but have limited strategic reasoning about the firm's incentives. I show that in a dynamic setting, the firm can use current sellouts to mislead consumers about future demand and increase future profits. Sellouts tend to occur when demand is low, they are accompanied by introductory pricing, and certain consumers benefit from others being misled.

Keywords: sellouts; conformity; bounded rationality; obfuscation (search for similar items in EconPapers)
JEL-codes: D03 D42 D83 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014-04-01
New Economics Papers: this item is included in nep-cbe, nep-com, nep-cta, nep-mic and nep-mkt
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Journal Article: Sellouts, Beliefs, and Bandwagon Behavior (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1415

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