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Consumer Search, Steering and Choice Overload

Author

Listed:
  • Volker Nocke
  • Patrick Rey

Abstract

We develop a model of within-firm sequential, directed search and study a firm's ability and incentive to steer consumers. We find that the firm often benefits from adopting a noisy positioning strategy, which limits the information available to consumers. This induces consumers to keep searching but discourages some of them from visiting the firm. This occurs even though the firm and the consumers have in common the interest of maximizing the probability of trade. Because of such noisy positioning, an increase in the size of the product line further discourages consumers from visiting the firm-consistent with choice overload.

Suggested Citation

  • Volker Nocke & Patrick Rey, 2023. "Consumer Search, Steering and Choice Overload," CRC TR 224 Discussion Paper Series crctr224_2023_421, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_421
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp421
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    More about this item

    Keywords

    consumer search; sequintal search; directed search; product variety; choice overload; multiproduct firm; platform; steering;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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