Skip to main content
SpringerLink
Log in

Endogenous Differentiation of Consumer Preferences Under Quality Uncertainty in a SPA Network

  • Conference paper
  • First Online:
Book cover Algorithms and Models for the Web Graph (WAW 2017)

Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 10519))

Included in the following conference series:

Abstract

We study a duopoly market on which there is uncertainty of a product quality. Consumers adaptively learn about quality of products when they buy them (direct learning) or from other consumers with whom they are interacting in a social network modelled as a SPA graph (indirect learning). We show that quality uncertainty present in such a market leads to endogenous segmentation of consumers’ preferences towards suppliers. Additionally, we show that in this setting, even if both companies have the same expected quality, the company with lower variance of quality will gain higher market share.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 54.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    We omit it in the text as it is large but easy to derive.

References

  • Aiello, W., Bonato, A., Cooper, C., Janssen, J., Prałat, P.: A spatial web graph model with local influence regions. Internet Math. 5, 175–196 (2009)

    Article  MathSciNet  MATH  Google Scholar 

  • Akerlof, G.A.: The market for “lemons”: quality uncertainty and the market mechanism. Q. J. Econ. 84(3), 488–500 (1970)

    Article  Google Scholar 

  • Cooper, C., Frieze, A., Prałat, P.: Some typical properties of the spatial preferred attachment model. Internet Math. 10, 27–47 (2014)

    MathSciNet  MATH  Google Scholar 

  • Evans, G.W., Honkapohja, S.: Learning and Expectations in Macroeconomics. Princeton University Press (2001)

    Google Scholar 

  • Frydman, R., Phelps, E.S. (eds.): The Way Forward for Macroeconomics. Princeton University Press (2013)

    Google Scholar 

  • Izquierdo, S.S., Izquierdo, L.R.: The impact of quality uncertainty without asymmetric information on market efficiency. J. Bus. Res. 60(8), 858–867 (2007)

    Article  Google Scholar 

  • Janssen, J., Hurshman, M., Kalyaniwalla, N.: Model selection for social networks using graphlets. Internet Math. 8(4), 338–363 (2013a)

    Article  MathSciNet  Google Scholar 

  • Janssen, J., Prałat, P., Wilson, R.: Geometric graph properties of the spatial preferred attachment model. Adv. Appl. Math. 50, 243–267 (2013b)

    Article  MathSciNet  MATH  Google Scholar 

  • Janssen, J., Prałat, P., Wilson, R.: Non-uniform distribution of nodes in the spatial preferential attachment model. Internet Math. 12(1–2), 121–144 (2016)

    Article  MathSciNet  Google Scholar 

  • Linderman, K., Schroeder, R.G., Zaheer, S., Choo, A.S.: Six sigma: a goal-theoretic perspective. J. Oper. Manage. 21(2), 193–203 (2003)

    Article  Google Scholar 

  • Lucas, R.E.: Expectations and the neutrality of money. J. Econ. Theory 4(2), 103–124 (1972)

    Article  MathSciNet  Google Scholar 

  • Muth, J.F.: Optimal properties of exponentially weighted forecasts. J. Am. Statist. Assoc. 55(290), 299–306 (1960)

    Article  MATH  Google Scholar 

  • Muth, J.F.: Rational expectations and the theory of price movements. Econometrica J. Econ. Soc. 315–335 (1961)

    Google Scholar 

  • Nerlove, M.: Adaptive expectations and cobweb phenomena. Q. J. Econ. 72(2), 227–240 (1958)

    Article  MathSciNet  Google Scholar 

  • Ostroumova Prokhorenkova, L., Prałat, P., Raigorodskii, A.: Modularity of complex networks models. In: Bonato, A., Graham, F.C., Prałat, P. (eds.) WAW 2016. LNCS, vol. 10088, pp. 115–126. Springer, Cham (2016). doi:10.1007/978-3-319-49787-7_10

    Chapter  Google Scholar 

  • Sargent, T.J.: Rational expectations, the real rate of interest, and the natural rate of unemployment. Brookings Papers Econ. Activity 2, 429–480 (1973)

    Article  Google Scholar 

  • Schroeder, R.G., Linderman, K., Liedtke, C., Choo, A.S.: Six sigma: definition and underlying theory. J. Oper. Manage. 26(4), 536–554 (2008)

    Article  Google Scholar 

  • Wormald, N.: The Differential Equation Method for Random Graph Processes and Greedy Algorithms. Lectures on Approximation and Randomized Algorithms, pp. 73–155 (1999)

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Decision Support and Analysis Unit, Warsaw School of Economics, Warsaw, Poland

    Bogumił Kamiński & Tomasz Olczak

  2. Department of Mathematics, Ryerson University, Toronto, ON, M5B 2K3, Canada

    Paweł Prałat

Authors
  1. Bogumił Kamiński
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Tomasz Olczak
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Paweł Prałat
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Paweł Prałat .

Editor information

Editors and Affiliations

  1. Ryerson University, Toronto, Ontario, Canada

    Anthony Bonato

  2. Mathematics, UC San Diego, La Jolla, California, USA

    Fan Chung Graham

  3. Mathematics, Ryerson University, Toronto, Ontario, Canada

    Paweł Prałat

Rights and permissions

Reprints and permissions

Copyright information

© 2017 Springer International Publishing AG

About this paper

Cite this paper

Kamiński, B., Olczak, T., Prałat, P. (2017). Endogenous Differentiation of Consumer Preferences Under Quality Uncertainty in a SPA Network. In: Bonato, A., Chung Graham, F., Prałat, P. (eds) Algorithms and Models for the Web Graph. WAW 2017. Lecture Notes in Computer Science(), vol 10519. Springer, Cham. https://doi.org/10.1007/978-3-319-67810-8_4

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-67810-8_4

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-67809-2

  • Online ISBN: 978-3-319-67810-8

  • eBook Packages: Computer ScienceComputer Science (R0)

Publish with us

Policies and ethics

Search

Navigation