Product Launches and Buying Frenzies: A Dynamic Perspective

Pascal Courty and Javad Nasiry

No 9462, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Buying frenzies in which a firm intentionally undersupplies a product during its initial launch phase are a common practice within several industries such as electronics (cell phones, video games, game consoles), luxury cars, and fashion goods. We develop a dynamic model of buying frenzies that captures the production and sales of a product over time by the firm and then characterize the conditions under which frenzies are an optimal policy for the firm. We show that buying frenzies occur when customers are sufficiently uncertain about their product valuations and when customers discount the future but not excessively. Further, we propose a measure of

Keywords: Advance selling; Buying frenzy; Customer desperation (search for similar items in EconPapers)
JEL-codes: D4 L2 (search for similar items in EconPapers)
Date: 2013-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Product Launches and Buying Frenzies: A Dynamic Perspective (2016)
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