Popularity and Debut

Christian Winther ()

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper focuses on the impact of brand popularity on two firms’ optimal entry strategies into an emerging industry. Brand popularity shows the proportion of consumers holding an affinity towards one firm’s product or the other. Word of mouth effects influence the distribution of preferences between periods, in turn expected profits. I show that differences in popularity give firms dissimilar incentives to lead or to follow, which affects their strategic choices of timing of entry when fast introduction is costly. I study the subgame perfect equilibria of the game to observe how they connect to popularity, strength of word of mouth communication, and consumer heterogeneity. The paper shows for which markets the asymmetry in the duopoly should be expected to increase or decrease. The model is extended to study how pre-ordering influences the efficiency of the industry.

Keywords: Product differentiation; product introduction; technological change; word of mouth communication (search for similar items in EconPapers)
JEL-codes: D83 L11 O33 (search for similar items in EconPapers)
Pages: 31
Date: 2008-01-17
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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2008-02

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