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We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially...
Persistent link: https://www.econbiz.de/10014070716
Motivated by the rise of social media, we build a model studying the effect of an economy's potential for social learning on the adoption of innovations of uncertain quality. Provided consumers are forward-looking (i.e., recognize the value of waiting for information), equilibrium dynamics...
Persistent link: https://www.econbiz.de/10013027942
the Law of Large Numbers that is the source of market efficiency, but rather the 'structure of innovation' that subsists …
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sufficiently high, license without entry strategy is optimum; if the low quality good’s quality is low, both of entry without … license strategy and license without entry strategy are optimum; when cost functions are quadratic, if the high quality good …’s quality is high, license without entry strategy is optimum; if the high quality good’s quality is low, entry with license …
Persistent link: https://www.econbiz.de/10011573193
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Experience goods are those where the utility received is not known until consumed. The purchase can be viewed as a lottery. Consequently, risk preferences should affect willingness to pay and the price. Data from panels of experts rating cigars is used to test this assertion. For inexpensive...
Persistent link: https://www.econbiz.de/10013096056
This study examines the situation in which a monopolist offers freeware as an advertisement for the increase of demand to maximize profit even though the existence of such freeware will reduce the power of the monopolist in the market. This study proves that the successful application of...
Persistent link: https://www.econbiz.de/10012955291
We study a simple model in which two vertically differentiated firms compete in prices and mass advertising on an initially uninformed market. Consumers differ in their preference for quality. There is an upper bound on prices since consumers cannot spend more on the good than a fixed amount...
Persistent link: https://www.econbiz.de/10014636238
This paper extends the classic two-armed bandit problem to a many-agent setting in which I players each face the same experimentation problem. The main change from the single- agent problem is that an agent can now learn from the current experimentation of other agents. Information is therefore...
Persistent link: https://www.econbiz.de/10014042501