Waterfall Versus Sprinkler Product Launch Strategy: Influencing the Herd

Bhalla, Manaswini

doi:10.1111/joie.12013

“…To the best of my knowledge, there is no article in this literature that shows how a monopolist will price its good when facing consumers who delay their buying strategically. discuss how a monopolist prices its goods when faced by one consumer at each period, and discusses how a monopolist prices its good when faced with nonstrategic consumers; however, their consumers do not have strategic delay incentives…”

Section: Introductionmentioning

confidence: 99%

Waiting for Signaling Quality

Günay

¹

2014

Southern Economic Journal

2

0

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When a durable good of uncertain quality is introduced to the market, some consumers strategically delay their buying until the next period, with the hope of learning the unknown quality. I analyze the monopolist's pricing and waiting strategies when consumers have strategic delay incentives. I show when the monopolist offers introductory low prices in pooling equilibria. I also find two types of separating equilibria: one where the high‐type monopolist signals its quality by choosing a different price than the low‐type monopolist in the first period and another where the high‐type monopolist announces the product in the first period and waits to sell only in the second period. Waiting creates a credible cost for signaling; hence, the monopolist uses it as a signaling device.

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“…They may follow a sprinkler strategy, where they release the new product in all markets simultaneously, or a waterfall strategy, where they release it in one market after another. These decisions can be relevant for products as diverse as books, movies, cars, and video games (see Aoyagi (2010), Bhalla (2013) and the examples therein). Sony's European Marketing director recently touched on this dilemma regarding the launch of its new gaming console: "We will launch [the PlayStation 4] this year.…”

Section: Introductionmentioning

confidence: 99%

“…Liu and Schiraldi (2012) show that the optimal scheme is often fully simultaneous when prior beliefs about quality are low. Bhalla (2013) suggests instead that a firm should use simultaneous sales when its updated beliefs about quality are high, as long as it can adjust its price over time. 5 The closest paper from a technical point of view is Aoyagi (2010) where a seller also divides consumers into different cohorts.…”

Section: Introductionmentioning

confidence: 99%

Optimal Sales Schemes for Network Goods

Parakhonyak

¹

,

Vikander

²

2013

SSRN Journal

0

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This paper examines the optimal sequencing of sales in the presence of network externalities. A firm sells a good to a group of consumers whose payoff from buying is increasing in total quantity sold. The firm selects the order to serve consumers so as to maximize expected sales. It can serve all consumers simultaneously, serve them all sequentially, or employ any intermediate scheme. We show that the optimal sales scheme is purely sequential, where each consumer observes all previous sales before choosing whether to buy himself. A sequential scheme maximizes the amount of information available to consumers, allowing success to breed success. Failure can also breed failure, but this is made less likely by consumers' desire to influence one another's behavior. We show that when consumers differ in the weight they place on the network externality, the firm would like to serve consumers with lower weights first. Our results suggests that a firm launching a new product should first target independent-minded consumers who can serve as opinion leaders for those who follow.

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“…They may follow a sprinkler strategy, where they release the new product in all markets simultaneously, or a waterfall strategy, where they release it in one market after another. These decisions can be relevant for products as diverse as books, movies, cars, and video games (see Aoyagi (2010), Bhalla (2013) We'll reveal that in more detail later, but we can't yet." 2 A firm's decision on how to sequences sales, and in particular whether to use a simultaneous or sequential scheme, can have a crucial impact when consumption decisions are interdependent, so when each consumer's willingness to buy depends on how many others buy as well.…”

Section: Introductionmentioning

confidence: 99%

“…Liu and Schiraldi (2012) show that the optimal scheme is often fully simultaneous when prior beliefs about quality are low. Bhalla (2013) suggests instead that a firm should use simultaneous sales when its updated beliefs about quality are high, as long as it can adjust its price over time. 5 The closest paper from a technical point of view is Aoyagi (2010) where a seller also divides consumers into different cohorts.…”

Section: Introductionmentioning

confidence: 99%

Optimal Sales Schemes for Network Goods

Parakhonyak

¹

,

Vikander

²

2019

View full text Add to dashboard Cite

This paper examines the optimal sequencing of sales in the presence of network externalities. A firm sells a good to a group of consumers whose payoff from buying is increasing in total quantity sold. The firm selects the order to serve consumers so as to maximize expected sales. It can serve all consumers simultaneously, serve them all sequentially, or employ any intermediate scheme. We show that the optimal sales scheme is purely sequential, where each consumer observes all previous sales before choosing whether to buy himself. A sequential scheme maximizes the amount of information available to consumers, allowing success to breed success. Failure can also breed failure, but this is made less likely by consumers' desire to influence one another's behavior. We show that when consumers differ in the weight they place on the network externality, the firm would like to serve consumers with lower weights first. Our results suggests that a firm launching a new product should first target independent-minded consumers who can serve as opinion leaders for those who follow. JEL-codes: M31, D42, D82, L12

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Waterfall Versus Sprinkler Product Launch Strategy: Influencing the Herd

Cited by 19 publications

References 25 publications

Waiting for Signaling Quality

Waiting for Signaling Quality

Optimal Sales Schemes for Network Goods

Optimal Sales Schemes for Network Goods

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