Product Launches with Biased Reviewers: The Importance of Not Being Earnest

David Gill and Daniel Sgroi

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The standard simple sequential herding model is altered to allow a firm with a new product to have it reviewed publicly before launch. Reviewers are either inherently pessimistic, optimistic or unbiased. We find the counter-intuitive result that a firm with a good product will prefer a pessimistic reviewer. Although firms with a bad product prefer unbiased reviewers, signalling considerations will force them to copy the choice of the good product firm in order to avoid revealing product type. This asymmetric impact provides a strong explanation for the stylized fact that reviewers are often viewed as being very critical.

Keywords: bias; herding; reviewers; sequential sales (search for similar items in EconPapers)
JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
Pages: 62
Date: 2003-07
Note: IO, ET
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0334

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