``We sold a million copies''-The role of advertising past sales

Paulo Monteiro and J. L. Moraga
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J. L. Moraga: Copenhagen University

Industrial Organization from University Library of Munich, Germany

Abstract: We model a two periods market with two-sided quality uncertainty. In the first period the seller gathers information about consumers' tastes upon observing his sales. In the second period the seller may or may not deliver the information. If the monopolist must commit either to reveal or conceal past-sales before observing them, commiting to reveal is the dominant strategy whenever advertising cost is low, buyers are many and their private information is accurate. When the seller can postpone the 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: 20 pages
Date: 1998-12-08
New Economics Papers: this item is included in nep-mic
Note: Type of Document - Postscript file; prepared on IBM PC - PC- TEX/Latex; to print on HP/PostScript/; pages: 20 ; figures: request from author/
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Related works:
Working Paper: "We sold a million copies" - The Role of Advertising Past Sales (1999)
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