IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Expert-mediated sequential search

  • Chhabra, Meenal
  • Das, Sanmay
  • Sarne, David
Registered author(s):

    This paper studies markets, such as Internet marketplaces for used cars or mortgages, in which consumers engage in sequential search. In particular, we consider the impact of information-brokers (experts) who can, for a fee, provide better information on true values of opportunities. We characterize the optimal search strategy given a price and the terms of service set by the expert, and show how to use this characterization to solve the monopolist expert’s service pricing problem. Our analysis enables the investigation of three common pricing schemes (pay-per-use, unlimited subscription, and package pricing) that can be used by the expert. We demonstrate that in settings characteristic of electronic marketplaces, namely those with lower search costs for consumers and lower costs of production of expert services, unlimited subscription schemes are favored. Finally, we show that the platform that connects consumer and experts can improve social welfare by subsidizing the purchase of expert services. The optimal level of subsidy forces the buyer to exactly fully internalize the marginal cost of provision of expert services. In electronic markets, this cost is minimal, so it may be worthwhile for the platform to make the expert freely available to consumers.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221713008564
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 234 (2014)
    Issue (Month): 3 ()
    Pages: 861-873

    as
    in new window

    Handle: RePEc:eee:ejores:v:234:y:2014:i:3:p:861-873
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Anonymous, 1994. "Research Updates," Journal of Food Distribution Research, Food Distribution Research Society, vol. 25(1), February.
    2. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    3. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
    4. Cason, Timothy N. & Friedman, Daniel, 2003. "Buyer search and price dispersion: a laboratory study," Journal of Economic Theory, Elsevier, vol. 112(2), pages 232-260, October.
    5. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
    6. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-43, Summer.
    7. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    8. Benjamin Bental & Dan Peled, 2002. "Quantitative growth effects of subsidies in a search theoretic R&D model," Journal of Evolutionary Economics, Springer, vol. 12(4), pages 397-423.
    9. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
    11. James B. MacQueen, 1964. "Optimal Policies for a Class of Search and Evaluation Problems," Management Science, INFORMS, vol. 10(4), pages 746-759, July.
    12. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May.
    13. David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 935-63, December.
    14. Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science.
    15. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
    16. Bloch, Francis & Ryder, Harl, 2000. "Two-Sided Search, Marriages, and Matchmakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 93-115, February.
    17. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey: Part I," Economic Inquiry, Western Economic Association International, vol. 14(2), pages 155-89, June.
    18. Christian Terwiesch & Christoph H. Loch, 2004. "Collaborative Prototyping and the Pricing of Custom-Designed Products," Management Science, INFORMS, vol. 50(2), pages 145-158, February.
    19. Arun Sundararajan, 2004. "Nonlinear Pricing of Information Goods," Management Science, INFORMS, vol. 50(12), pages 1660-1673, December.
    20. Alp E. Atakan, 2006. "Assortative Matching with Explicit Search Costs," Econometrica, Econometric Society, vol. 74(3), pages 667-680, 05.
    21. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    22. Xianjun Geng & Maxwell B. Stinchcombe & Andrew B. Whinston, 2005. "Bundling Information Goods of Decreasing Value," Management Science, INFORMS, vol. 51(4), pages 662-667, April.
    23. Grosfeld-Nir, Abraham & Sarne, David & Spiegler, Israel, 2009. "Modeling the search for the least costly opportunity," European Journal of Operational Research, Elsevier, vol. 197(2), pages 667-674, September.
    24. Edward A. Baryla, Jr. & Leonard V. Zumpano & Harold W. Elder, 2000. "An Investigation of Buyer Search in the Residential Real Estate Market under Different Market Conditions," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 75-91.
    25. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    26. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
    27. Haynes, Michelle & Thompson, Steve, 2008. "Price, price dispersion and number of sellers at a low entry cost shopbot," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 459-472, March.
    28. Kang, Byung-Kook, 2005. "Optimal stopping problem with double reservation value property," European Journal of Operational Research, Elsevier, vol. 165(3), pages 765-785, September.
    29. Hak Chun, Young, 1996. "Selecting the best choice in the weighted secretary problem," European Journal of Operational Research, Elsevier, vol. 92(1), pages 135-147, July.
    30. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    31. Robin S. Lee & Michael Schwarz, 2009. "Interviewing in Two-Sided Matching Markets," NBER Working Papers 14922, National Bureau of Economic Research, Inc.
    32. Wilson, Kurt E. & Szechtman, Roberto & Atkinson, Michael P., 2011. "A sequential perspective on searching for static targets," European Journal of Operational Research, Elsevier, vol. 215(1), pages 218-226, November.
    33. Wright, Randall, 1986. "Job Search and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 38-55, February.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:234:y:2014:i:3:p:861-873. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.