Social Learning in a Competitive Market with Consumer Reviews

Two products of unknown qualities are simultaneously launched by two different firms in the market. An infinite population of consumers with heterogeneous preferences sequentially decide whether to purchase one of the two products or not to buy at all. Arriving consumers estimate the qualities of products based on the distribution of binary online reviews reported by prior consumers and decide accordingly, obeying a non-Bayesian rule. The goal of our work is to describe how the online review mechanism drives the spread of information in a competitive market and to provide conditions under which consumers' quality estimates converge almost surely to the true qualities of products