68 research outputs found
The Implications of Pricing on Social Learning
We study the implications of endogenous pricing for learning and welfare in
the classic herding model . When prices are determined exogenously, it is known
that learning occurs if and only if signals are unbounded. By contrast, we show
that learning can occur when signals are bounded as long as non-conformism
among consumers is scarce. More formally, learning happens if and only if
signals exhibit the vanishing likelihood property introduced bellow. We discuss
the implications of our results for potential market failure in the context of
Schumpeterian growth with uncertainty over the value of innovations
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