Quality Risk Aversion, Conjectures, and New Product Diffusion

Francesco Bogliacino and Giorgio Rampa

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: In this paper we provide a generalization of the standard models of the diffusion of a new product. Consumers are heterogeneous and risk averse, and the firm is uncertain about the demand curve: both learn from past observations. The attitude towards risk has important effects with regard to the diffusion pattern. In our model, downward-biased signals to consumers can prevent the success of the product, even if its objective quality is high: a “lock-in” result. We show in addition that the standard logistic pattern can be derived from the model. Finally, we discuss the asymptotic behavior of the learning dynamics, with regard to the multiplicity and the stability of equilibria, and to their welfare properties.

Keywords: Heterogeneity; Multiple equilibria; Lock-in; Product diffusion; Risk aversion. (search for similar items in EconPapers)
JEL-codes: D81 L15 O33 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.eeri.eu/documents/wp/EERI_RP_2009_27.pdf (application/pdf)

Related works:
Journal Article: Quality risk aversion, conjectures, and new product diffusion (2012)
Working Paper: Quality Risk Aversion, Conjectures, and New Product Diffusion (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eei:rpaper:eeri_rp_2009_27

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