Ajay Kalra, Sameer Mathur
(in preparation for second review at the Journal of Marketing Research )

Abstract: 
Some manufactures and retailers reveal which products are their bestselling items while others elect not to.  We examine the conditions under which it is more profitable for a firm to reveal their bestsellers.  The effect of the announcement is that customer’ perceptions of their match with the bestselling product increase.   This effect leads to shift in consumer preferences and impacts the prices that the firm charges.  We investigate when either the high price or low priced product is the bestseller. We show that the decision to reveal the bestseller depends on the extent of heterogeneity in consumers’ valuation for quality, the heterogeneity in consumers’ taste preferences and the quality difference between the two products.  If consumers in the market are very different in their tastes or if they vary a lot in how they value quality, the firm should reveal the bestseller but only if the bestseller are the high quality-high price items. On the other hand, if consumers are quite similar in their tastes or are alike in how they value quality, the firm should reveal their bestsellers only if the low price-low quality products are more popular. Quality difference between products also matters: firms should reveal low price items as bestsellers if the quality difference is high.  But if the quality difference is low, they should reveal the bestseller, only if the high quality product is the bestseller.  We experimentally test the assumption that bestseller announcements change consumer preferences and also find empirical evidence that firms’ pricing behavior is linked to their strategy of announcing bestsellers.  We also show that posting the bestsellers reduces consumer welfare.

Keywords: Bestsellers,  Firm Announcements,  Product Differentiation