Sell-outs, Beliefs and Bandwagon Behavior

Nicholas Vikander

Research output: Working paperDiscussion paper

Abstract

This paper examines how a firm can strategically use sellouts to influence beliefs about its good's popularity. A monopolist faces a market of conformist consumers, whose willingness to pay is increasing in their beliefs about aggregate demand. Consumers are broadly rational but have limited strategic reasoning about the firm's incentives. I show that in a dynamic setting, the firm can use current sellouts to mislead consumers about future demand and increase future profits. Sellouts tend to occur when demand is low, they are accompanied by introductory pricing, and certain consumers benefit from others being misled.
Original languageEnglish
Publication statusPublished - 2011

Keywords

  • sellouts
  • conformity
  • bounded rationality
  • obfuscation
  • D03
  • D42
  • D83

Fingerprint

Dive into the research topics of 'Sell-outs, Beliefs and Bandwagon Behavior'. Together they form a unique fingerprint.

Cite this