Designing Social Learning

Abstract: This paper studies strategic communication in the context of social learning. Product reviews
are used by consumers to learn product quality, but in order to write a review, a consumer must
be convinced to purchase the item first. When reviewers care about the welfare of future
consumers, this leads to a conflict: a reviewer today wants the future consumers to purchase
the item even when this comes at a loss to them, so that more information is revealed for
the consumers that come after. We show that due to this conflict, communication via reviews
is inevitably noisy, regardless of whether reviewers can commit to a communication strategy
or have to resort to cheap talk. The optimal communication mechanism involves truthful
communication of extreme experiences and pools the moderate experiences together. pdf