Is Buzz an Efficient Means to Sell Goods

Abstract

The goal of the paper is to compare the efficiency of two selling methods, perfect information (advertising) and buzz. One has to speak of two different kinds of goods: standard goods and experience based goods. Standard goods can be sold using perfect information or buzz and this allows the comparison. The model for the sale when perfect information is used is provided by game theory (Bertrand Equilibrium). Buzz is modeled thanks to the notion of cognitive bias (“laziness”) from Khaneman. The result of the comparison is that buzz is not advantageous, no matter the concerned party (sellers or customers). Experience based goods like videogames can be sold only using buzz. One can model the sale of videogames when the first version is free (it occurs frequently). Again, using buzz is not very efficient (but in the case of videogames it cannot be avoided).