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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.

Suggested Citation

  • Zhou, Jidong, 2011. "Ordered search in differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 253-262, March.
  • Handle: RePEc:eee:indorg:v:29:y:2011:i:2:p:253-262
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    References listed on IDEAS

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    1. Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1213-1270.
    2. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-654, May.
    3. Marco A. Haan & José L. Moraga‐González, 2011. "Advertising for Attention in a Consumer Search Model," Economic Journal, Royal Economic Society, vol. 121(552), pages 552-579, May.
    4. Yongmin Chen & Chuan He, 2011. "Paid Placement: Advertising and Search on the Internet," Economic Journal, Royal Economic Society, vol. 121(556), pages 309-328, November.
    5. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany.
    6. Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233.
    7. Asher Wolinsky, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 493-511.
    8. Ali Hortaçsu & 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, Oxford University Press, vol. 119(2), pages 403-456.
    9. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    10. Maria Arbatskaya, 2007. "Ordered search," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 119-126, March.
    11. Perry, Motty & Wigderson, Avi, 1986. "Search in a Known Pattern," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 225-230, February.
    12. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
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    Citations

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    Cited by:

    1. Moraga-Gonzalez, Jose L. & Petrikaite, Vaiva, 2011. "Consumer search costs and the incentives to merge under Bertrand Competition," IESE Research Papers D/934, IESE Business School.
    2. Gamp, Tobias, 2015. "Search, Differentiated Products, and Obfuscation," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112886, Verein für Socialpolitik / German Economic Association.
    3. Renato Gomes, 2014. "Optimal auction design in two-sided markets," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 248-272, June.
    4. Armstrong, Mark, 2016. "Ordered Consumer Search," MPRA Paper 72194, University Library of Munich, Germany.
    5. Astorne-Figari, Carmen & Yankelevich, Aleksandr, 2014. "Consumer search with asymmetric price sampling," Economics Letters, Elsevier, vol. 122(2), pages 331-333.
    6. Alexei Parakhonyak & Maria Titova, 2016. "Shopping Malls, Platforms and Consumer Search," Economics Series Working Papers 807, University of Oxford, Department of Economics.
    7. repec:kap:revind:v:51:y:2017:i:1:d:10.1007_s11151-017-9575-y is not listed on IDEAS
    8. repec:kap:jeczfn:v:121:y:2017:i:2:d:10.1007_s00712-016-0518-0 is not listed on IDEAS
    9. repec:eee:indorg:v:57:y:2018:i:c:p:255-277 is not listed on IDEAS
    10. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages 368-395, November.
    11. Chen, Yongmin & Zhang, Tianle, 2016. "Intermediaries and Consumer Search," MPRA Paper 76051, University Library of Munich, Germany.

    More about this item

    Keywords

    Search Price dispersion Product differentiation;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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