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| Author: | Bergemann, D. Välimäki, J. |
| Title: | Experimentation in markets |
| Journal: | Review of Economic Studies
2000 : APR, VOL. 67:2(231), p. 213-234 |
| Index terms: | Market research Product development Econometric models Bayesian statistics Markov chains |
| Language: | eng |
| Abstract: | The authors present a model of entry and exit with Bayesian learning and price competition. They assume that the performance of the new product is publicly observable. As agents learn from the experiments of others, information externalities arise. The Markov perfect equilibrium prices and allocation are determined. In a single market, the combination of the informational externalities among the buyers and the strategic pricing by the sellers results in excessive experimentation. |
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