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Endogenous Quality in Social Learning

Author

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  • Georgy Lukyanov

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Konstantin Shamruk

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Ekaterina Logina

    (HSE - Higher School of Economics [Perm] - MAI - National research university)

Abstract

We study a dynamic reputation model with a fixed posted price where only pur-chases are public. A long-lived seller chooses costly quality; each buyer observes the purchase history and a private signal. Under a Markov selection, beliefs split into two cascades—where actions are unresponsive and investment is zero—and an interior region where the seller invests. The policy is inverse-U in reputation and produces two patterns: Early Resolution (rapid absorption at the optimistic cascade) and Dou-ble Hump (two investment episodes). Higher signal precision at fixed prices enlarges cascades and can reduce investment. We compare welfare and analyze two design levers: flexible pricing, which can keep actions informative and remove cascades for patient sellers, and public outcome disclosure, which makes purchases more informa-tive and expands investment.

Suggested Citation

  • Georgy Lukyanov & Konstantin Shamruk & Ekaterina Logina, 2025. "Endogenous Quality in Social Learning," Working Papers hal-05319716, HAL.
    • Handle: RePEc:hal:wpaper:hal-05319716
    Note: View the original document on HAL open archive server: https://hal.science/hal-05319716v1
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