Market Diffusion with Consumer-Based Bilateral Learning

Studies in Applied Economics, Vol. 5, pp 1-20, December 2011

26 Pages Posted: 13 May 2009 Last revised: 4 Feb 2013

Hiroshi Kitamura

Kyoto Sangyo University

Akira Miyaoka

Kansai University

Date Written: September 5, 2011

Abstract

This paper analyzes the market diffusion of a new product whose quality is uncertain. Consumers learn the product quality by observing the history of market outcomes. Firms cannot observe how consumers evaluate the product quality; instead, they learn by observing consumer behavior. New entry occurs gradually because of informational externalities. This dual uncertainty contributes to an S-shaped diffusion of the new product with declining prices.

Keywords: Experience Goods, Quality Uncertainty, Bilateral Learning, S-shaped Diffusion

JEL Classification: D11, L11, L14

Suggested Citation

Kitamura, Hiroshi and Miyaoka, Akira, Market Diffusion with Consumer-Based Bilateral Learning (September 5, 2011). Studies in Applied Economics, Vol. 5, pp 1-20, December 2011. Available at SSRN: https://ssrn.com/abstract=1403793

Hiroshi Kitamura (Contact Author)

Kyoto Sangyo University ( email )

Motoyama, Kamigamo, Kita-Ku
Kyoto, Kyoto 603-8555
Japan

HOME PAGE: http://www.geocities.jp/hiro4kitamura/index.html

Akira Miyaoka

Kansai University ( email )

3-3-35 Yamatecho
Suita, Osaka, 564-8680
Japan

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