Waterfall versus sprinkler product launch strategy: Influencing the herd
Description
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.
Copyright Date
January 2013
Publication Date
1-1-2013
Keywords
Marketing, Consumption, Consumer services
Conference
20th April, 2011, Indira Gandhi Institute of Development and Research, Mumbai
