Canonical theories of observational learning (Bikhchandani et al. (1992), Banerjee (1992)) have been used to study information cascades (“herding”) in a wide variety of markets. This paper embeds observational learning in an equilibrium model of industry to investigate its implications for...

We propose a general equilibrium model of industry where consumers learn about firms' unobserved product quality over time. Because consumers learn through purchase decisions, price setting is a crucial lever through which firms manipulate future demand. We map equilibrium policies to a range of...