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Learning Tastes Through Social Interaction

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  • Alice Hsiaw

    (Department of Economics and Accounting, College of the Holy Cross)

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.

Suggested Citation

  • Alice Hsiaw, 2014. "Learning Tastes Through Social Interaction," Working Papers 1405, College of the Holy Cross, Department of Economics.
    • Handle: RePEc:hcx:wpaper:1405
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    File URL: https://hcapps.holycross.edu/hcs/RePEc/hcx/HC1405-Hsiaw_SocialInteraction.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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