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Private signals and fast product adoption under incomplete information

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  • Arieli, Itai
  • Arigapudi, Srinivas

Abstract

This paper investigates the dynamics of product adoption under incomplete information regarding the product quality. A new agent observes a small sample of product choices within the population and receives a noisy private signal regarding the realized state of the world. Using simple heuristics, the agent estimates both the product quality and the distribution of product choices in the population. The agent then chooses a product that is a best response to this estimate. We show that fast adoption of the optimal product in the population occurs if and only if the strength of the private signal exceeds a certain threshold.

Suggested Citation

  • Arieli, Itai & Arigapudi, Srinivas, 2024. "Private signals and fast product adoption under incomplete information," Games and Economic Behavior, Elsevier, vol. 147(C), pages 377-387.
    • Handle: RePEc:eee:gamebe:v:147:y:2024:i:c:p:377-387
    DOI: 10.1016/j.geb.2024.08.009
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    References listed on IDEAS

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