# The Implications of Pricing on Social Learning

## TL;DR

This paper explores how endogenous pricing influences social learning and welfare, revealing that bounded signals can still lead to learning if non-conformism is rare, contrasting with exogenous pricing scenarios.

## Contribution

It demonstrates that endogenous pricing allows social learning with bounded signals under certain conditions, extending the classic herding model.

## Key findings

- Learning occurs with bounded signals if non-conformism is scarce.
- Endogenous prices enable social learning even with bounded signals.
- Implications for market failure and innovation valuation in uncertain environments.

## Abstract

We study the implications of endogenous pricing for learning and welfare in the classic herding model . When prices are determined exogenously, it is known that learning occurs if and only if signals are unbounded. By contrast, we show that learning can occur when signals are bounded as long as non-conformism among consumers is scarce. More formally, learning happens if and only if signals exhibit the vanishing likelihood property introduced bellow. We discuss the implications of our results for potential market failure in the context of Schumpeterian growth with uncertainty over the value of innovations.