Quality Risk Aversion, Conjectures, and New Product Diffusion

Francesco Bogliacino and Giorgio Rampa
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Giorgio Rampa: Department of Economics and Quantitative Methods, University of Pavia

No 92, Quaderni di Dipartimento from University of Pavia, Department of Economics and Quantitative Methods

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)
Pages: 34 pages
Date: 2009-01
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http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/wpaper/q092.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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