Prominence and Consumer Search
AbstractThis paper 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 non-prominent rivals.� The impact of making a firm prominent is that it 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.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 379.
Date of creation: 01 Jan 2008
Date of revision:
Consumer Search; Marketing; Prominent Display; Product Differentiation;
Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-25 (All new papers)
- NEP-COM-2008-03-25 (Industrial Competition)
- NEP-MIC-2008-03-25 (Microeconomics)
- NEP-MKT-2008-03-25 (Marketing)
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