Herding Behaviour and the Size of Customer Base as a Commitment to Quality.
This paper refers to herding behaviour as developed in Bikhchandani et al. (1992), Bannerjee (1992) and Choi and Scarpa (1994). We examine the behaviour of a potential customer who does not know how many of her predecessors decided not to purchase the product. We show that, ceteris paribus, a smaller (larger) customer base increases the likelihood of a positive (negative) cascade. Hence, a firm can signal its commitment to high quality (Schelling 1960) by choosing to develop a customer base that relies upon the customer's "private" information rather than one that relies on an informational cascade. Copyright 2000 by The London School of Economics and Political Science
Year of publication: |
2000
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Authors: | Choi, Chong Ju ; Dassiou, Xeni ; Gettings, Stephen |
Published in: |
Economica. - London School of Economics (LSE). - Vol. 67.2000, 267, p. 375-98
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Publisher: |
London School of Economics (LSE) |
Saved in:
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