New Product Introductions, Retailer Learning, and Pricing

Job Market Paper

Abstract

I study how retailers introduce new products and learn to set prices across a network of stores. Retailers are often uncertain about the demand for new products which makes setting an appropriate price difficult. To learn about demand for a product that is new to a market, retailers use demand for existing, similar products and demand in similar markets. As a result, retailers know the least about the demand for products that are new to all markets and have few substitutes. When retailers are uncertain about the demand for a new product, they introduce the product to an initial subset of stores rather than their full network. The retailer then learns about demand by observing sales in that market and similar markets. The result is that retailers learn about demand and set prices for new products based on their experience with close substitutes and by utilizing similarities in demand across their network of stores.

Publication
Job Market Paper