Theoretical Economics 19 (2024), 1505–1541

We build a model studying the effect of an economy's potential for social learning on the adoption of innovations of uncertain quality. Assuming consumers are forward-looking (i.e.,\ recognize the value of waiting for information), we analyze how qualitative and quantitative features of the learning environment affect equilibrium adoption dynamics, welfare, and the speed of learning. Based on this, we show how differences in the learning environment translate into observable differences in adoption dynamics, suggesting a purely informational channel for two commonly documented adoption patterns---S-shaped and concave curves. We also identify environments that are subject to a saturation effect: Increased opportunities for social learning can slow down adoption and learning and do not increase consumer welfare, possibly even being harmful.

Keywords: Innovation adoption, social learning, informational free-riding, strategic experimentation, exponential bandits

JEL classification: D80, D83, O33