ECON 106T Lecture Notes - Lecture 6: Freemium, Toner, Justin Bieber
Document Summary
In period 2, look for mixed strategy equilibrium: winner: w=p+p[1-fl(p)], where fl(. ) is price dist of l, loser: l=p[1-fh(p)], where fh(. ) is price dist of w. If w loses in t=2 then w=v: indifference fl(p)=(2p-v)/p on [v/2,v], indifference fw(p)=(p-1 2v)/p. In period t=1: compete for difference in , both price p=-v/2. Both firms make profits: winner going after loyal customers, softens price competition, loser makes money in second period, softens competition in first period. Can firm attract customers without bribing them: first-mover advantage. Build up share before others enter: have complements that others lack, selling to influential customers Classification of key customers: maven people who accumulate knowledge, connector people who have lots of. Weak ties : salesmen people who can persuade others. Example: launching new headphones: first give to tech bloggers to vouch for quality, then give to pop journalists to get word out, then give to justin beiber to persuade his fans.
