Learning tastes through social interaction

Alice Hsiaw

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PA, 64-85

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.

Keywords: Social interaction; Coordination; Consumption externality; Product differentiation (search for similar items in EconPapers)
JEL-codes: D11 D21 D43 D61 D71 D83 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Learning Tastes Through Social Interaction (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pa:p:64-85

DOI: 10.1016/j.jebo.2014.08.010

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