We study dynamic pricing by a monopolist selling to buyers who learn from each other's purchases. The price posted in each period serves to extract rent from the current buyer, as well as to control the amount of information transmitted to future buyers. As information increases future rent extraction, the monopolist has an incentive to subsidize learning by charging a price that results in information revelation. Nonetheless, in the long run, the monopolist generally induces herding by either selling to all buyers or exiting the market.

Monopoly, Public information, Social learning, Herd behavior, Informational cascade, Binary signal, D83, L12, L15,

We analyze an overlapping generations model with fixed costs of stock market participation. Participation in the stock market is determined endogenously and covaries positively with preceding innovations in dividends. The equilibrium share price is positively related to market participation of the same period and to information about future dividends. There is "rational trend chasing" in the sense that, although all agents are rational, market participation rises after an increase of the share price and falls after a decrease. Finally, we show that the endogenous fluctuations of market participation lead to increased volatility of the share price.There is clear empirical evidence that most agents participate only in very few asset markets and that this holds even for agents with substantial liquid wealth [see e.g., Mankiw and Zeldes (1991); further references can be found in Allen and Gale (1994)]. Moreover, it seems that asset market participation fluctuates. For instance, in informal discussions changes of stock prices are often explained by an inflow or outflow of investors. In this article we analyze an overlapping generations model in which participation in the stock market is determined endogenously and fluctuates over time. The model can help to explain stylized facts of stock markets, such as trend chasing and excess volatility.

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