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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26040
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| Title: | Lock in and Switch: Asymmetric Information and New Product Diffusion |
| Authors: | Cabral, Luis |
| Issue Date: | Apr-2007 |
| Series/Report no.: | EC-07-11 |
| Abstract: | Many new web-based services are introduced as free services. Depending
on the seller’s business model, some remain free in the long run,
while others switch to pay mode at some point in time. I characterize
the relation between buyers and a new service seller when the former are
uncertain about the latter’s business model. I derive a natural
signalling equilibrium where the seller plays a
“lock-in-and-switch” strategy, while buyers play a
“wait-and-see” strategy. I show the equilibrium entails
diffusion even though consumers are identical and equally aware of the
new service’s existence. |
| URI: | http://hdl.handle.net/2451/26040 |
| Appears in Collections: | Economics Working Papers
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