Economics Insights @ CBS

New product development is integral to marketing. There are questions, however, regarding the extent to which new products are good and for whom they are good. While benefits may be obvious for manufacturers, sellers, and users of any particular product, stakeholders beyond the transaction and direct usage of said product may receive no benefits and perhaps may be harmed by new products.

We consider the problem of estimating convex boundaries from blurred and noisy observations. In our model, the convolution of an intensity function f is observed with additive Gaussian white noise. The function f is assumed to have convex support G whose boundary is to be recovered.

Counter to the "start high, end high" effect of anchors in individual judgments and dyadic negotiations, 6 studies using a diverse set of methodologies document how and why, in the social setting of auctions, lower starting prices result in higher final prices. Three processes contribute to this effect. First, lower starting prices reduce barriers to entry, which increase traffic and generate higher final prices. Second, lower starting prices entice bidders to invest time and energy (creating sunk costs) and, consequently, escalate their commitments.