{"id":184678,"date":"2010-03-11T00:00:00","date_gmt":"2010-03-13T00:17:38","guid":{"rendered":"https:\/\/www.microsoft.com\/en-us\/research\/msr-research-item\/pricing-information-cascades\/"},"modified":"2016-08-22T11:27:25","modified_gmt":"2016-08-22T18:27:25","slug":"pricing-information-cascades","status":"publish","type":"msr-video","link":"https:\/\/www.microsoft.com\/en-us\/research\/video\/pricing-information-cascades\/","title":{"rendered":"Pricing Information Cascades"},"content":{"rendered":"<div class=\"asset-content\">\n<p>We consider the problem of optimal pricing of a common-value<br \/>\nproduct in the presence of social learning effects. A new product<br \/>\nreaches the market and agents obtain private signals that partially<br \/>\ninform them about the value of this product. Agents decide<br \/>\nsequentially whether to purchase this product. Before making their own<br \/>\ndecisions, they also observe the purchasing decisions of agents who<br \/>\nacted previously and learn from those actions in a Bayesian rational<br \/>\nfashion. We address the problem of how a firm should price the product<br \/>\nwhen taking social learning into account.<\/p>\n<p>Our first result shows that firms do best asymptotically if the firms<br \/>\nselect prices that lead the customers to learn the true value of the<br \/>\nproduct. We show how the firm can induce learning at a low cost by<br \/>\ninducing a vanishing fraction of the agents to act according to their<br \/>\nprivate signals. We also show a lower bound on the agents&#8217; regret of<br \/>\n<i>T<sup>2\/3<\/sup><\/i> for a society of size <i>T<\/i>. We finally show a pricing policy<br \/>\nthat achieves this lower bound.<\/p>\n<\/div>\n<p><!-- .asset-content --><\/p>\n","protected":false},"excerpt":{"rendered":"<p>We consider the problem of optimal pricing of a common-value product in the presence of social learning effects. A new product reaches the market and agents obtain private signals that partially inform them about the value of this product. Agents decide sequentially whether to purchase this product. Before making their own decisions, they also observe [&hellip;]<\/p>\n","protected":false},"featured_media":195541,"template":"","meta":{"msr-url-field":"","msr-podcast-episode":"","msrModifiedDate":"","msrModifiedDateEnabled":false,"ep_exclude_from_search":false,"_classifai_error":"","msr_hide_image_in_river":0,"footnotes":""},"research-area":[],"msr-video-type":[],"msr-locale":[268875],"msr-post-option":[],"msr-session-type":[],"msr-impact-theme":[],"msr-pillar":[],"msr-episode":[],"msr-research-theme":[],"class_list":["post-184678","msr-video","type-msr-video","status-publish","has-post-thumbnail","hentry","msr-locale-en_us"],"msr_download_urls":"","msr_external_url":"https:\/\/youtu.be\/_-BSpbSM9vk","msr_secondary_video_url":"","msr_video_file":"","_links":{"self":[{"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-video\/184678","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-video"}],"about":[{"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/types\/msr-video"}],"version-history":[{"count":0,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-video\/184678\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/media\/195541"}],"wp:attachment":[{"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/media?parent=184678"}],"wp:term":[{"taxonomy":"msr-research-area","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/research-area?post=184678"},{"taxonomy":"msr-video-type","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-video-type?post=184678"},{"taxonomy":"msr-locale","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-locale?post=184678"},{"taxonomy":"msr-post-option","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-post-option?post=184678"},{"taxonomy":"msr-session-type","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-session-type?post=184678"},{"taxonomy":"msr-impact-theme","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-impact-theme?post=184678"},{"taxonomy":"msr-pillar","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-pillar?post=184678"},{"taxonomy":"msr-episode","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-episode?post=184678"},{"taxonomy":"msr-research-theme","embeddable":true,"href":"https:\/\/www.microsoft.com\/en-us\/research\/wp-json\/wp\/v2\/msr-research-theme?post=184678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}