Julia Salmi (UCL)

“Coasian Dynamics and Endogenous Learning”

Abstract: We study social learning in markets where a monopolistic seller and potential buyers learn from past buyers’ reviews and experiences. Buyers’ ability to time their purchases allows them to free-ride on information from other buyers. Our main result is that stationary equilibria are inefficient because of too little and too slow sales. We also show that the seller’s commitment power may improve welfare. In addition, we analyze how good news and bad news learning affect the results.