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Informational Leverage and the Endogenous Timing of Product Introductions

Jay Pil Choi

Title:
Informational Leverage and the Endogenous Timing of Product Introductions
Author(s):
Choi, Jay Pil
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
9596-12
Abstract:
This paper provides a new rationale for bundling based on informational leverage. It is demonstrated that physically tying a product of established quality to one of unknown quality may mitigate the problem of asymmetric information encountered in the latter market. Leveraging reputation in one market to provide information about product quality in a second market can have profound implications for the timing of new product introductions. Bundling motivated by informational leverage can enhance efficiency by timing of product introduction is considered, however, the welfare consequences of bundling are ambiguous. The positive effect of market creation must be weighed against the negative effect of market delay.
Subject(s):
Economics
Item views:
274
Metadata:
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