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Ordered search in differentiated markets

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  • Zhou, Jidong

Abstract

This paper presents an ordered search model in which consumers search both for price and product fitness. I construct an equilibrium in which there is price dispersion and prices rise in the order of search. The top firms in consumer search process, though charge lower prices, earn higher profits due to their larger market shares. Compared to random search, ordered search can induce all firms to charge higher prices and harm market efficiency.

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Bibliographic Info

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

Volume (Year): 29 (2011)
Issue (Month): 2 (March)
Pages: 253-262

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Handle: RePEc:eee:indorg:v:29:y:2011:i:2:p:253-262

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

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Keywords: Search Price dispersion Product differentiation;

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References

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  1. 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.
  2. Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233.
  3. Susan Athey & Glenn Ellison, 2007. "Position Auctions with Consumer Search," Levine's Bibliography 122247000000001633, UCLA Department of Economics.
  4. 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.
  5. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
  6. 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.
  7. Anderson, S.P. & Renault, R., 1997. "Pricing, Product Diversity and Search Costs: A Bertrand-Chamberlin-Diamond Model," Papers 97.481, Toulouse - GREMAQ.
  8. M. L. Weitzman, 1978. "Optimal Search for the Best Alternative," Working papers 214, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006.
  10. Marco A. Haan & Jose Luis Moraga-Gonzalez, 2009. "Advertising for Attention in a Consumer Search Model," Tinbergen Institute Discussion Papers 09-031/1, Tinbergen Institute.
  11. Maria Arbatskaya, 2007. "Ordered search," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 119-126, 03.
  12. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Jose Luis Moraga-Gonzalez & Vaiva Petrikaite, 2011. "Consumer Search Costs and the Incentives to merge under Bertrand Competition," Tinbergen Institute Discussion Papers 11-099/1, Tinbergen Institute.
  2. José L. Moraga-González & Vaiva Petrikaitė, 2013. "Search costs, demand-side economies, and the incentives to merge under Bertrand competition," RAND Journal of Economics, RAND Corporation, vol. 44(3), pages 391-424, 09.
  3. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages F368-F395, November.

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