Sell-outs, Beliefs, and Bandwagon Behavior
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Sell-outs, Beliefs, and Bandwagon Behavior. / Vikander, Nick.
2012.Research output: Working paper › Research
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TY - UNPB
T1 - Sell-outs, Beliefs, and Bandwagon Behavior
AU - Vikander, Nick
PY - 2012
Y1 - 2012
N2 - This paper examines how a firm can strategically use sell-outs to manipulate consumer beliefs about aggregate demand. It considers a two-period setting with consumption externalities where certain consumers are boundedly rational. I show that selling out in period 1 can lead naive consumers to overestimate demand in period 2, which itself increases demand from all consumers. The firm uses sell-outs to manipulate beliefs whenever demand is lower than consumers expect, even if the fraction of naive consumers is small. It offers a period 1 price discount and charges a period 2 premium which can leave all sophisticated consumers better off.
AB - This paper examines how a firm can strategically use sell-outs to manipulate consumer beliefs about aggregate demand. It considers a two-period setting with consumption externalities where certain consumers are boundedly rational. I show that selling out in period 1 can lead naive consumers to overestimate demand in period 2, which itself increases demand from all consumers. The firm uses sell-outs to manipulate beliefs whenever demand is lower than consumers expect, even if the fraction of naive consumers is small. It offers a period 1 price discount and charges a period 2 premium which can leave all sophisticated consumers better off.
M3 - Working paper
BT - Sell-outs, Beliefs, and Bandwagon Behavior
ER -
ID: 81614990