Market Diffusion with Consumer-Based Bilateral Learning

Hiroshi Kitamura () and Akira Miyaoka ()
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Hiroshi Kitamura: Faculty of Economics, Sapporo Gakuin University
Akira Miyaoka: Graduate School of Economics, Osaka University

No 09-13-Rev, 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; instead, they learn by observing consumer behavior. New entry occurs gradually because of informational externalities. This dual uncertainty contributes to an S-shaped diffusion of the new product with 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: 28 pages
Date: 2009-05, Revised 2011-09
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