Seminar – Alone, together: A model of social (mis)learning from reviews

Tommaso Bondi, Assistant Professor, Cornell Tech and Cornell University

We develop a dynamic model of naïve social learning from consumer reviews. In our model, consumers decide which of two products to buy based on both expected quality and idiosyncratic taste. Products’ qualities are initially unknown, and are (mis)learned from reviews. At the heart of the model lies a dynamic feedback loop between reviews, beliefs, and choices: period t reviews influence t + 1 consumers’ beliefs, and thus choices; these determine the average of t + 1 reviews, which in turn influences t + 2 beliefs, choices and reviews. We show that in the long-run (t = ∞), reviews are systematically biased, leading some consumers astray. In particular, reviews relatively advantage lower quality and more polarising products, since these products induce stronger taste-based consumer self-selection. Thus, in stark contrast with the winner-takes-all dynamics of classic observational learning models, in which consumers learn from the choices of their predecessors, social learning from opinions generates excessive choice fragmentation. Our findings have implications for interpreting the variance of reviews; pricing in presence of reviews; the design of crowd-sourced exploration; and the short and long term effectiveness of fake reviews.

Speaker bio

Tommaso Bondi is an Assistant Professor at Cornell Tech and the SC Johnson School of Management at Cornell University. Tommaso’s research mostly revolves around the economics of digitisation, quantitative marketing, and behavioural and experimental economics. His most recent research seeks to understand – through theory, large datasets, and experiments – how the internet is changing how we discover and consume new products, as well as the potential biases in beliefs and perceptions that can arise in the process. His empirical work has focused on the arts industries. Tommaso earned a Bachelors degree in Mathematics from the University of Milan in 2011, a Masters in Economics and Social Sciences from Bocconi University in 2013, and a PhD in Economics from NYU’s Stern School of Business in 2020, under the supervision of Luís Cabral. In the Spring of 2014, he was a Visiting Scholar at UC Berkeley’s Haas School of Business. He is the 2013 recipient of the Marco Fanno Scholarship, awarded yearly by the Unicredit & Universities Foundation to the two best Italian economists under the age of 25. His research has been most recently funded by the Russell Sage Foundation and the NET Institute.

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