Innovations in information technology have increased the prevalence of markets with large numbers of products. Each week, for example, an average of over 800 books are published, and an average of over 1,100 iOS apps are released in Apple's App Store. This review summarizes existing research about how consumers learn about new products in such markets, focusing on mechanisms like bestseller lists and user-generated product reviews. In addition to reviewing research findings about how these mechanisms directly influence sales, this article also discusses how these mechanisms affect broader market outcomes, such as the shape of the success distribution and the likelihood that good products are discovered.


Article metrics loading...

Loading full text...

Full text loading...


Literature Cited

  1. Anderson C. 2007. The Long Tail: How Endless Choice Is Creating Unlimited Demand New York: Random House
  2. Bagwell K. 2007. The economic analysis of advertising. Handbook of Industrial Organization 3 M Armstrong, R Porter 1701–844 Amsterdam: Elsevier [Google Scholar]
  3. Banerjee AV. 1992. A simple model of herd behavior. Q. J. Econ. 107:3797–817 [Google Scholar]
  4. Bass FM. 1969. A new product growth for model consumer durables. Manag. Sci. 15:5215–27 [Google Scholar]
  5. Bikhchandani S, Hirshleifer D, Welch I. 1992. A theory of fads, fashion, custom, and cultural change as informational cascades. J. Polit. Econ. 100:5992–1026 [Google Scholar]
  6. Bikhchandani S, Hirshleifer D, Welch I. 1998. Learning from the behavior of others: conformity, fads, and informational cascades. J. Econ. Perspect. 12:3151–70 [Google Scholar]
  7. Brynjolfsson E, Hu JY, Simester D. 2011. Goodbye Pareto principle, hello long tail: the effect of search costs on the concentration of product sales. Manag. Sci. 57:81373–86 [Google Scholar]
  8. Brynjolfsson E, Hu JY, Smith MD. 2003. Consumer surplus in the digital economy: estimating the value of increased product variety at online booksellers. Manag. Sci. 49:111580–96 [Google Scholar]
  9. Brynjolfsson E, Hu JY, Smith MD. 2010. The longer tail: the changing shape of Amazon's sales distribution curve SSRN Work. Pap. 1679991
  10. Butters GR. 1977. Equilibrium distributions of sales and advertising prices. Rev. Econ. Stud. 44:3465–91 [Google Scholar]
  11. Cai H, Chen Y, Fang H. 2009. Observational learning: evidence from a randomized natural field experiment. Am. Econ. Rev. 99:3864–82 [Google Scholar]
  12. Chevalier J, Goolsbee A. 2003. Measuring prices and price competition online: Amazon.com and BarnesandNoble.com. Quant. Mark. Econ. 1:2203–22 [Google Scholar]
  13. Chevalier JA, Mayzlin D. 2006. The effect of word of mouth on sales: online book reviews. J. Mark. Res. 43:3345–54 [Google Scholar]
  14. Davis JP, Muzyrya Y, Yin P-L. 2014. Experimentation strategies and entrepreneurial innovation: inherited market differences in the iPhone ecosystem Work. Pap., INSEAD, Fontainebleau, Fr.
  15. Elberse A, Oberholzer-Gee F. 2007. Superstars and underdogs: an examination of the long-tail phenomenon in video sales. Mark. Sci. Inst. Rep. 4:49–72 [Google Scholar]
  16. Evans DS. 2009. The online advertising industry: economics, evolution, and privacy. J. Econ. Perspect. 23:337–60 [Google Scholar]
  17. Garthwaite CL. 2014. Demand spillovers, combative advertising, and celebrity endorsements. Am. Econ. J. Appl. Econ. 6:276–104 [Google Scholar]
  18. Goeree MS. 2008. Limited information and advertising in the US personal computer industry. Econometrica 76:51017–74 [Google Scholar]
  19. Grossman GM, Shapiro C. 1984. Informative advertising with differentiated products. Rev. Econ. Stud. 51:163–81 [Google Scholar]
  20. Hendricks K, Sorensen A. 2009. Information and the skewness of music sales. J. Polit. Econ. 117:2324–69 [Google Scholar]
  21. Hendricks K, Sorensen A, Wiseman T. 2012. Observational learning and demand for search goods. Am. Econ. J. Microecon. 4:11–31 [Google Scholar]
  22. Kumar A, Smith MD, Telang R. 2014. Information discovery and the long tail of motion picture content. MIS Q 38:41057–78 [Google Scholar]
  23. Li X, Bresnahan T, Yin P-L. 2016. Paying incumbents and customers to enter an industry: buying downloads Work. Pap. Stanford Univ. Stanford, CA:
  24. Luca M. 2011. Reviews, reputation, and revenue: the case of Yelp.com Work. Pap. 12-016 Harvard Bus. School Cambridge, MA:
  25. Mayzlin D, Dover Y, Chevalier J. 2014. Promotional reviews: an empirical investigation of online review manipulation. Am. Econ. Rev. 104:82421–55 [Google Scholar]
  26. Mobius M, Rosenblat T. 2014. Social learning in economics. Annu. Rev. Econ. 6:1827–47 [Google Scholar]
  27. Newberry P. 2016. An empirical study of observational learning. RAND J. Econ. 47:2394–432 [Google Scholar]
  28. Newberry P, Zhou X. 2016. Heterogeneous effects of online reputation for local and national retailers Work. Pap. Pennsylvania State Univ. State College:
  29. Rosen S. 1981. The economics of superstars. Am. Econ. Rev. 71:5845–58 [Google Scholar]
  30. Salganik MJ, Dodds PS, Watts DJ. 2006. Experimental study of inequality and unpredictability in an artificial cultural market. Science 311:854–56 [Google Scholar]
  31. Smith L, Sørensen P. 2000. Pathological outcomes of observational learning. Econometrica 68:2371–98 [Google Scholar]
  32. Sorensen AT. 2007. Bestseller lists and product variety. J. Ind. Econ. 40:4715–38 [Google Scholar]
  33. Tan TF, Netessine S. 2009. Is Tom Cruise threatened? Using Netflix prize data to examine the long tail of electronic commerce Work. Pap. Univ. Pennsylvania Philadelphia:
  34. Tucker C, Zhang J. 2011. How does popularity information affect choices? A field experiment. Manag. Sci. 57:5828–42 [Google Scholar]
  35. Waldfogel J. 2011. Bye, bye, Miss American Pie? The supply of new recorded music since Napster NBER Work. Pap. 16882
  36. Waldfogel J. 2015. Cinematic explosion: new products, unpredictabilty, and realized quality in the digital era Work. Pap. Univ. Minnesota Minneapolis:
  37. Weeds H. 2012. Superstars and the long tail: the impact of technology on market structure in media industries. Inf. Econ. Policy 24:160–68 [Google Scholar]

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error