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When Good News about your Rival is Good For You, Marketing Science

Abstract

The Internet has led to a large number of third-parts' sources that offer high-quality information about firms's products at little or no cost to consumers. As a result, many of these sources have grown in popularity, extending well-beyond the usual reach of traditional third parties such as Consumer Reports and Kelly's Blue Book. For example. the online version of Edmunds offers, at no cost to consumers, information about new products, existing products. long-term tests, and buyers guides, all relating to the automotive industry. AvWeb.com delivers weekly aviation news and new product reviews to its readers, and a large number of websites follow developments on computer platforms such as the Apple Macintosh. In this paper we analyze how the provision ot third-party information affects the division of profits in a multiproduct distribution channel. To illustrate, consider the competition between Microsoft and Apple in the operating systems (OS) market and their channel relationship to CompUSA, a retailer that sells both Macs and Windows-based PCs. Consider two pieces of third- parts' information. First, suppose that CNET, an Internet technology site, reviews the newest upgrade of the MacOS and writes that the new user interface is even easier to use than previously. Second, suppose that an article in the technology section of the Wail Street Journal notes that changes in Apple's networking support now enable Macs to be better integrated into PC networks. These two pieces of information are similar in the sense that they both express good news about the MacOS and thus they both can be expected to benefit Apple by increasing consumer demand for Macs. One might also expect that in both cases CompUSA will capture some of the gains that come from the increased demand for Macs and that Microsoft will lose because the good news about the MacOS will induce sonic consumers to choose Macs over Windows-based PCs. However, we will show that this intuition is incorrect. The...

Type

Article

Author(s)

Greg Shaffer, Florian Zettelmeyer

Date Published

2002

Citations

Shaffer, Greg, and Florian Zettelmeyer. 2002. When Good News about your Rival is Good For You. Marketing Science. 21(3): 273-293.

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