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The implications of pricing on social learning

Author

Listed:
  • Arieli, Itai

    (Technion–Israel Institute of Technology)

  • Koren, Moran

    (Tel Aviv University)

  • Smorodinsky, Rann

    (Technion–Israel Institute of Technology)

Abstract
Two firms produce substitute goods of unknown quality. At each stage the firms set prices and a consumer with private information and unit demand buys from one of the firms. Both firms and consumers see the entire history of prices and purchases. Will such markets aggregate information? Will the firm with the superior product necessarily prevail? We adapt the classic social-learning model by introducing strategic dynamic pricing. We provide necessary and sufficient conditions for asymptotic learning. In contrast to previous results, we show that asymptotic learning can occur when signals are bounded, namely, happens when the density of the consumers at the boundaries of the posterior belief distribution goes to zero. We refer to this property of the signal structure as the ``vanishing margins'' property.

Suggested Citation

  • Arieli, Itai & Koren, Moran & Smorodinsky, Rann, 2022. "The implications of pricing on social learning," Theoretical Economics, Econometric Society, vol. 17(4), November.
    • Handle: RePEc:the:publsh:3842
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymptotic Learning; vanishing margins;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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