Social learning with differentiated products

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Learning from friends is a key process by which consumers acquire information about available products. This article embeds social learning in a model of firms producing differentiated products. I consider how the structure of social relationships between consumers influences pricing and welfare. In particular, how a variety of characteristics of social networks - distribution of friendships, homophily, clustering, and correlations between an individual's preferences and number of friends - influence these outcomes. I also find conditions under which consumer awareness and the sensitivity of demand to prices are useful measures of the informational efficiency of markets.

Original languageEnglish
Pages (from-to)226-248
Number of pages23
JournalRAND Journal of Economics
Issue number1
Publication statusPublished - 2019

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