AbstractA seller wishes to prevent the discovery of rival offers by its prospective customers. We study sales techniques which serve this purpose by making it harder for a customer to return to buy later after a search for alternatives. These include making an exploding offer, offering a "buy-now" discount, or requiring payment of a deposit in order to buy later. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer when all do so. In a monopoly setting where the buyer has an uncertain outside option, the optimal selling mechanism features both buy-now discounts and deposit contracts. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative. In many cases the outcome then involves exploding offers, so that no consumers return to buy after search.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 48568.
Date of creation: Jun 2013
Date of revision:
Consumer search; sales techniques; price discrimination; sequential screening;
Other versions of this item:
- Mark Armstrong & Jidong Zhou, 2013. "Search Deterrence," Economics Series Working Papers, University of Oxford, Department of Economics 661, University of Oxford, Department of Economics.
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- 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
- L80 - Industrial Organization - - Industry Studies: Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-CTA-2013-07-28 (Contract Theory & Applications)
- NEP-MIC-2013-07-28 (Microeconomics)
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