Learning Tastes Through Social Interaction

Alice Hsiaw

No 1405, Working Papers from College of the Holy Cross, Department of Economics

Abstract: This paper offers an information-based model of social interaction, and analyzes optimal investment and pricing of services that facilitate interaction in a duopoly. Agents have uncertainty over their preferences but are aware that they are correlated with others’, so there exists an incentive to communicate with others in the population. When a firm’s good can be bundled with a coordination mechanism for its consumers, its value is endogenously determined due to a consumption externality. Although this mechanism increases total surplus, it is underprovided and consumer surplus decreases.

Pages: 42 pages
Date: 2014-08
New Economics Papers: this item is included in nep-cta and nep-mic
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Published in Journal of Economic Behavior and Organization, Volume 107 Part A, November 2014, Pages 64-85.

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https://hcapps.holycross.edu/hcs/RePEc/hcx/HC1405-Hsiaw_SocialInteraction.pdf (application/pdf)

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Journal Article: Learning tastes through social interaction (2014)
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