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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/28521
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| Title: | Word of Mouth and Taste Matching: A Theory of the Long Tail |
| Authors: | Hervas-Drane, Andres - Columbia University and Universitat Pompeu Fabra |
| Keywords: | Search, Word of Mouth, Sales Concentration, Long Tail |
| Issue Date: | 2007 |
| Series/Report no.: | NET Institute Working Paper;07-41 |
| Abstract: | I present a model to assess the impact of demand-side factors on the
concentration of sales within large product assortments. Consumers face
a search problem within an assortment of horizontally differentiated
products supplied by a monopolist. They may search for a product match
by drawing products from the assortment or by seeking word of mouth
recommendations from other consumers. Product evaluations prior to
purchase and word of mouth are shown to arise endogenously, and increase
the concentration of sales. I show that taste matching mechanisms such
as recommender systems, which allow consumers to obtain product
recommendations from others with similar preferences, reduce sales
concentration by generating a long tail effect, an increase in the tail
of the sales distribution. Insights are derived on the mechanisms
driving concentration in artistic markets and their strategic
implications for the firm. The model is suited for experience good
markets such as music, cinema, literature and video game entertainment. |
| URI: | http://hdl.handle.net/2451/28521 |
| Appears in Collections: | NET Institute Working Papers Series
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