Market Diffusion with Consumer-Based Bilateral Learning

Hiroshi Kitamura ()
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Hiroshi Kitamura: Graduate School of Economics, Osaka University

No 09-13, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper analyzes the market diffusion of a new product whose quality is uncertain. Consumers learn the product quality by observing the history of market outcomes. Firms cannot observe how consumers evaluate the product quality and learn it in response to consumer fs behavior. As a result of informational externalities, new entry occurs gradually. This dual uncertainty contributes to S-shaped diffusion of the new product with strictly declining prices.

Keywords: experience goods; quality uncertainty; bilateral learning; S-shaped diffusion. (search for similar items in EconPapers)
JEL-codes: D11 L11 L14 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-05
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0913

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