Herd behavior, the "penguin effect," and the suppression of informational diffusion: an analysis of informational externalities and payoff interdependency

Article Abstract:

A simple model of technology adoption is used to analyze the relationship between informational externalities and payoff tendency. The model uses N risk-neutral users who contemplate on adopting one of the two incompatible technologies A and B. The interplay of informational externalities and payoff interdependency instills risk-averse and clustering behavior in the technology adoption process. The analysis shows the difference in herd behavior and highlights the importance of backward externalities that information diffusion can apply with payoff interdependence among agents.

Technology

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Incentives for cost-reducing investment in a signalling model of product quality

Article Abstract:

A signalling model containing both hidden information about quality and hidden action about investment is presented to examine incentives for cost-reducing investment in cases where product quality is unobservable before purchase. It is shown that asymmetric information about quality may affect a firm's innovation incentive, depending upon the use of low-price or high-price signalling. Incomplete information alone does not increase or decrease a firm's incentives to invest.

Product quality, Cost control

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Market diffusion with two-sided learning

Article Abstract:

An S-shaped market diffusion path was observed in a duopolistic market when a new product with uncertain value was introduced. Market analysis showed that a heterogenous choice prevailed among buyers upon the introduction of the new product. Sellers, meanwhile, engaged in price-related rivalry in an effort to get a bigger slice of the market. A significant drop in the volume of sales was observed on the latter part of product marketing.

Research, Marketing

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