Waterfall versus sprinkler product launch strategy: influencing the herd

Document Type

Article

Publication Title

Journal of industrial Economics

Abstract

A seller decides the price and sequence in which a product of unknown value is introduced to consumers. Consumers inspect the product before consumption and observe past prices and sales. Consumption at a high price is informative for later consumers as it indicates that the product is likely to be of high value. I show that on an average prices decrease over time. However, expected revenue on an average rises over time. For a high enough discount factor, I find that for extreme beliefs the firm introduces the product to all consumers but for intermediate values the product is introduced only to one consumer.

Publication Date

1-4-2013

Publisher

Wiley

Volume

Vol.61

Issue

Iss.1

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