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.
Keywords
Reputation; Social learning; Informational cascades; Product quality; Dynamic games.;
JEL codes
- D82: Asymmetric and Private Information • Mechanism Design
- D83: Search • Learning • Information and Knowledge • Communication • Belief
- C73: Stochastic and Dynamic Games • Evolutionary Games • Repeated Games
- L15: Information and Product Quality • Standardization and Compatibility
Reference
Georgy Lukyanov, Konstantin Shamruk, and Ekaterina Logina, “Endogenous Quality in Social Learning”, TSE Working Paper, n. 25-1680, October 2025.
See also
Published in
TSE Working Paper, n. 25-1680, October 2025