When Reinforcing Processes Generate an Outcome-Quality Dip

When does market success indicate superior merit? We show that when consumer choices between products with equal prices depend on quality but also past popularity, more popular are not necessarily of higher quality. Rather, a medium level popularity may be associated lower than levels popularity. Using formal model, we this kind nonmonotonic association occurs reinforcing processes strong. More generally, dip can occur outcomes both and resources the latter allocated bimodally, some being given lot most receiving little. Empirically, illustrate such in movie theater sales ratings. The presence outcome-quality complicates learning from evaluation individuals new ventures, challenges legitimacy stratification systems, creates opportunities for sophisticated evaluators who understand dip.