The optimal choice of pre-launch reviewer

David Gill and Daniel Sgroi

Journal of Economic Theory, 2012, vol. 147, issue 3, 1247-1260

Abstract: We develop a framework in which: (i) a firm can have a new product tested publicly before launch; and (ii) tests vary in toughness, holding expertise fixed. Price flexibility boosts the positive impact on consumer beliefs of passing a tough test and mitigates the negative impact of failing a soft test. As a result, profits are convex in toughness: the firm selects either the toughest or softest test available. The toughest test is optimal when consumers start with an unfavorable prior and receive sufficiently uninformative private signals (an “innovative” product); the softest test is optimal when signals are sufficiently informative.

Keywords: Test; Reviewer; Certification; Bayesian learning; Information transmission; Marketing; Product launch; Bias; Tough test; Soft test (search for similar items in EconPapers)
JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Related works:
Working Paper: The Optimal Choice of Pre-Launch Reviewer (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:3:p:1247-1260

DOI: 10.1016/j.jet.2012.01.019

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