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When reinforcing processes generate an outcome-quality dip
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Denrell, Jerker and Liu, Chengwei (2021) When reinforcing processes generate an outcome-quality dip. Organization Science, 32 (4). pp. 1079-1099. doi:10.1287/orsc.2020.1414
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WRAP-When-reinforcing-processes-generate-outcome-quality-dip-Chen-2020.pdf - Accepted Version - Requires a PDF viewer. Download (2017Kb) | Preview |
Official URL: https://doi.org/10.1287/orsc.2020.1414
Abstract
When does market success indicate superior merit? We show that when consumer choices between products with equal prices depend on quality but also on past popularity, more popular products are not necessarily of higher quality. Rather, a medium level of popularity may be associated with lower quality than lower levels of popularity. Using a formal model, we show that this kind of nonmonotonic association occurs when reinforcing processes are strong. More generally, a dip can occur when outcomes depend on both quality and resources and the latter are allocated bimodally, with some being given a lot of resources and most receiving little. Empirically, we illustrate that such a dip occurs in the association between movie theater sales and ratings. The presence of a dip in the outcome-quality association complicates learning from market outcomes and evaluation of individuals and new ventures, challenges the legitimacy of stratification systems, and creates opportunities for sophisticated evaluators who understand the dip.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
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| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
| Library of Congress Subject Headings (LCSH): | Organizational behavior, Risk management, Motion picture industry -- Economic aspects, Evolutionary economics, Economics -- Decision making | ||||||||
| Journal or Publication Title: | Organization Science | ||||||||
| Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||
| ISSN: | 1047-7039 | ||||||||
| Official Date: | July 2021 | ||||||||
| Dates: |
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| Volume: | 32 | ||||||||
| Number: | 4 | ||||||||
| Page Range: | pp. 1079-1099 | ||||||||
| DOI: | 10.1287/orsc.2020.1414 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
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