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Search Deterrence

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  • Mark Armstrong
  • Jidong Zhou

Abstract

We study sales techniques which discourage consumer search by making it harder or more expensive to return to buy after a search for alternatives. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer when all do so. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative, and in many cases the outcome is as if the seller must make an exploding offer. Search deterrence results in sub-optimal matching of products to consumers and often raises the price consumers pay.

Suggested Citation

  • Mark Armstrong & Jidong Zhou, 2016. "Search Deterrence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 26-57.
    • Handle: RePEc:oup:restud:v:83:y:2016:i:1:p:26-57.
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    File URL: http://hdl.handle.net/10.1093/restud/rdv036
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. About exploding offers
      by Economic Logician in Economic Logic on 2013-09-23 19:40:00

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    Cited by:

    1. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    2. Pieter Gautier & Bo Hu & Makoto Watanabe, 2023. "Marketmaking Middlemen," RAND Journal of Economics, RAND Corporation, vol. 54(1), pages 83-103, March.
    3. Doval, Laura, 2018. "Whether or not to open Pandora's box," Journal of Economic Theory, Elsevier, vol. 175(C), pages 127-158.
    4. Andrew Rhodes & Chris M. Wilson, 2018. "False advertising," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 348-369, June.
    5. John Asker & Heski Bar-Isaac, 2020. "Vertical Information Restraints: Pro- and Anticompetitive Impacts of Minimum-Advertised-Price Restrictions," Journal of Law and Economics, University of Chicago Press, vol. 63(1), pages 111-148.
    6. Deb, Rahul & Said, Maher, 2015. "Dynamic screening with limited commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 891-928.

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    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • 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
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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