"We sold a million copies" - The Role of Advertising Past Sales

Paulo Monteiro and Jose Moraga-Gonzalez

No 1999-03, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: We model a two period monopoly market with two-sided quality uncertainty. In first period, seller gathers information about consumers´ tastes upon observing its sales. In second period, seller may or may not deliver the information. If monopolist must commit either to reveal or conceal past-sales before observing them, committing to reveal is the dominant strategy whenever advertising cost is low, buyers are many and their private information is accurate. When seller can postpone advertising decision and gains experience, past-sales revelation occurs partially. In equilibrium, delivery of sales-data occurs to induce some buyers´ herding behaviour. We carry out the analysis for two different informational scenarios.

Keywords: two-sided quality uncertainty; past-sales advertising; herding behaviour (search for similar items in EconPapers)
JEL-codes: D82 L15 M37 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1999-02
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuieci:1999-03

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