Opinion Leaders, Influence Activities and Leadership Rents
WZB, Markets and Political Economy Working Paper No. SP II 2003-29
21 Pages Posted: 21 Feb 2004
Date Written: December 2003
Consumers may observe previous consumers' choices. They may follow their choices if they think these consumers are better informed. In turn, firms may concentrate on influencing the early consumers. This, in turn, changes the nature of early consumers' choice behavior as a signal for other consumers. In this paper, I show that firms' influence activities need not distort earlier consumers' decisions, but may reduce the informative value of these decisions for other consumers if influence activities are noisy or if some firms have deep pockets and others are liquidity constrained.
Keywords: Opinion leaders, influence activities, promotional competition, leadership, deep pockets, liquidity constraints
JEL Classification: D43, D72, L15
Suggested Citation: Suggested Citation