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Ordered search and equilibrium obfuscation

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  • Wilson, Chris M.

Abstract

This paper demonstrates the incentives for an oligopolist to obfuscate by deliberately increasing the cost with which consumers can locate its product and price. Consumers are allowed to choose the optimal order in which to search firms and firms are able to influence this order through their choice of search costs and prices. Competition does not ensure market transparency -- equilibrium search costs are positive and asymmetric across firms. Intuitively, an obfuscating firm can soften the competition for consumers with low time costs by inducing the remaining consumers to optimally first search its rival.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 28 (2010)
Issue (Month): 5 (September)
Pages: 496-506

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Handle: RePEc:eee:indorg:v:28:y:2010:i:5:p:496-506

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Web page: http://www.elsevier.com/locate/inca/505551

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Keywords: Search costs Advertising Search order;

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References

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Citations

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Cited by:
  1. Michele Piccione & Ran Spiegler, 2010. "Price Competition under Limited Comparability," Levine's Working Paper Archive 661465000000001143, David K. Levine.
  2. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany.
  3. Eduardo Perez-Richet, 2012. "Competing with Equivocal Information," Working Papers hal-00675126, HAL.
  4. Chioveanu, Ioana & Zhou, Jidong, 2009. "Price Competition and Consumer Confusion," MPRA Paper 17340, University Library of Munich, Germany.
  5. Steffen Huck & Jidong Zhou, 2011. "Consumer Behavioural Biases in Competition: A Survey," Working Papers 11-16, New York University, Leonard N. Stern School of Business, Department of Economics.
  6. Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1213-1270.
  7. Glenn Ellison & Alexander Wolitzky, 2009. "A Search Cost Model of Obfuscation," NBER Working Papers 15237, National Bureau of Economic Research, Inc.
  8. Jose Luis Moraga-Gonzalez & Zsolt Sandor & Matthijs R. Wildenbeest, . "Do higher search costs make the markets less competitive?," Working Papers 2013-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  9. Nick Vikander, 2014. "Sellouts, Beliefs, and Bandwagon Behavior," Discussion Papers 14-15, University of Copenhagen. Department of Economics.
  10. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages F368-F395, November.
  11. Ioanna Chioveanu & Jidong Zhou, 2011. "Price Competition with Consumer Confusion," Working Papers 11-19, New York University, Leonard N. Stern School of Business, Department of Economics.

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