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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/28521

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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