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Competitive Information Disclosure in Search Markets

Author

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  • Simon Board
  • Jay Lu

Abstract

Buyers often search across sellers to learn which product best fits their needs. We study how sellers manage these search incentives through their disclosure strategies (e.g., product trials, reviews, and recommendations) and ask how competition affects information provision. If sellers can observe the beliefs of buyers or can coordinate their strategies, then there is an equilibrium in which sellers provide the "monopoly level" of information. In contrast, if buyers' beliefs are private, then there is an equilibrium in which sellers provide full information as search costs vanish. Anonymity and coordination thus play important roles in understanding how advice markets work.

Suggested Citation

  • Simon Board & Jay Lu, 2018. "Competitive Information Disclosure in Search Markets," Journal of Political Economy, University of Chicago Press, vol. 126(5), pages 1965-2010.
  • Handle: RePEc:ucp:jpolec:doi:10.1086/699211
    DOI: 10.1086/699211
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    References listed on IDEAS

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    Cited by:

    1. Armstrong, Mark & Zhou, Jidong, 2019. "Consumer information and the limits to competition," MPRA Paper 97123, University Library of Munich, Germany.
    2. Carroni, Elias & Ferrari, Luca & Righi, Simone, 2019. "The price of discovering your needs online," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 317-330.
    3. Lang, Ruitian, 2019. "Try before you buy: A theory of dynamic information acquisition," Journal of Economic Theory, Elsevier, vol. 183(C), pages 1057-1093.
    4. repec:cpr:ceprdp:14162 is not listed on IDEAS

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