Adaptive learning models of consumer behavior

Research output: Contribution to journalArticlepeer-review


In a model of dynamic duopoly, optimal price policies are characterized assuming consumers learn adaptively about the relative quality of the two products. A contrast is made between belief-based and reinforcement learning. Under reinforcement learning, consumers can become locked into the habit of purchasing inferior goods. Such lock-in permits the existence of multiple history-dependent asymmetric steady states in which one firm dominates. In contrast, belief-based learning rules must lead asymptotically to correct beliefs about the relative quality of the two brands and so in this case there is a unique steady state.
Original languageEnglish
Pages (from-to)348-368
Number of pages21
JournalJournal of Economic Behavior & Organization
Issue number3-4
Publication statusPublished - 2007


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