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Prominence and consumer search

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Author Info
Mark Armstrong
John Vickers
Jidong Zhou

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Abstract

This article examines the implications of prominence in search markets. We model prominence by supposing that the prominent firm will be sampled first by all consumers. If there are no systematic quality differences among firms, we find that the prominent firm will charge a lower price than its less prominent rivals. Making a firm prominent will typically lead to higher industry profit but lower consumer surplus and welfare. The model is extended by introducing heterogeneous product qualities, in which case the firm with the highest-quality product has the greatest incentive to become prominent, and making it prominent will boost industry profit, consumer surplus, and welfare. Copyright (c) 2009, RAND.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1756-2171.2009.00062.x
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Publisher Info
Article provided by RAND Corporation in its journal The RAND Journal of Economics.

Volume (Year): 40 (2009)
Issue (Month): 2 ()
Pages: 209-233
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:randje:v:40:y:2009:i:2:p:209-233

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Simon P. Anderson & Regis Renault, 1999. "Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model," Virginia Economics Online Papers 335, University of Virginia, Department of Economics. [Downloadable!]
    Other versions:
  2. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May. [Downloadable!] (restricted)
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  3. Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006. [Downloadable!]
  4. Ali Hortaç Su & Chad Syverson, 2004. "Product Differentiation, Search Costs, And Competition in the Mutual Fund Industry: A Case Study of S&P 500 Index Funds," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 403-456, May. [Downloadable!] (restricted)
  5. Wolinsky, Asher, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 493-511, August. [Downloadable!] (restricted)
  6. Liran Einav & Leeat Yariv, 2006. "What's in a Surname? The Effects of Surname Initials on Academic Success," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 175-188, Winter. [Downloadable!] (restricted)
  7. Bagwell, Kyle & Ramey, Garey, 1994. "Coordination Economies, Advertising, and Search Behavior in Retail Markets," American Economic Review, American Economic Association, vol. 84(3), pages 498-517, June. [Downloadable!] (restricted)
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  8. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  9. Perry, Motty & Wigderson, Avi, 1986. "Search in a Known Pattern," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 225-30, February. [Downloadable!] (restricted)
  10. Robert, Jacques & Stahl, Dale O, II, 1993. "Informative Price Advertising in a Sequential Search Model," Econometrica, Econometric Society, vol. 61(3), pages 657-86, May. [Downloadable!] (restricted)
  11. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June. [Downloadable!] (restricted)
  12. Susan Athey & Glenn Ellison, 2007. "Position Auctions with Consumer Search," Levine's Bibliography 122247000000001633, UCLA Department of Economics. [Downloadable!]
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  13. Brigitte C. Madrian & Dennis F. Shea, 2001. "THE POWER OF SUGGESTION: INERTIA IN 401(k) PARTICIPATION AND SAVINGS BEHAVIOR," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1149-1187, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany. [Downloadable!]
  2. Wilson, Chris M, 2009. "Market Frictions: A Unified Model of Search and Switching Costs," MPRA Paper 13672, University Library of Munich, Germany. [Downloadable!]
  3. Jidong Zhou, 2009. "Ordered Search in Differentiated Markets," EERI Research Paper Series EERI_RP_2009_28, Economics and Econometrics Research Institute (EERI). [Downloadable!]
    Other versions:
  4. Marco A. Haan & José Luis Moraga-González, 2009. "Advertising for Attention in a Consumer Search Model," Tinbergen Institute Discussion Papers 09-031/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  5. Chris M. Wilson, 2008. "Ordered Search and Equilibrium Obfuscation," Economics Series Working Papers 401, University of Oxford, Department of Economics. [Downloadable!]
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