This article provides an empirical examination of observational learning. Using data from an online market for music, I find that observational learning benefits consumers, producers of high-quality music, and the online platform. I also study the role of pricing as a friction to the learning process by comparing outcomes under demand-based pricing to counterfactual pricing schemes. I find that employing a fixed price (the industry standard) can hamper learning by reducing the incentive to experiment, resulting in less consumer surplus, but more expected revenue for the platform.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics