When a product of uncertain quality is first introduced, consumers may choose to strategically delay their purchasing decisions in anticipation of the product reviews of their peers. This paper investigates how the presence of social learning affects the strategic interaction between a dynamic-pricing monopolist and a forward-looking consumer population, within a simple two-period model. Our analysis yields three main insights. First, we find that the presence of SL has significant structural implications for optimal pricing policies: In the absence of social learning, decreasing price plans are always preferred by the firm; by contrast, in the presence of social learning we find that (i) if the firm commits to a price path ex ante (pre-announced pricing), an increasing price plan is typically announced, while (ii) if the firm adjusts price dynamicallyud(responsive pricing), prices are initially low and may either rise or decline over time. Second, we establishudthat under both pre-announced and responsive pricing, even though the social learning process exacerbatesudstrategic consumer behavior (i.e., increases strategic purchasing delays), its presence results in an increase inudexpected firm profit. Third, we illustrate that contrary to results reported in existing literature on strategicudconsumer behavior, in settings where social learning is significantly influential pre-announced pricing policiesudare generally not benefcial for the firm.
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