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

Author

Listed:
  • P. K. Monteiro

    (IMPA & Copenhagen University)

  • J. L. Moraga

    (Copenhagen University)

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.

Suggested Citation

  • P. K. Monteiro & J. L. Moraga, 1998. "``We sold a million copies''-The role of advertising past sales," Industrial Organization 9812001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:9812001
    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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    References listed on IDEAS

    as
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    Cited by:

    1. Monteiro, Paulo Klinger & Moraga-González, José Luis, 2003. "We Sold a Million Units -- The Role of Advertising Past-Sales," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 57(2), April.

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    More about this item

    Keywords

    two-sided quality uncertainty; past-sales advertising; herding behaviour;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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