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Privacy in Search Markets

Author

Listed:
  • Laurenz Marstaller

    (University of Bonn)

Abstract

Heterogeneous search costs enable price discrimination, which I study in the canonical Wolinsky (1986) sequential search setting. Firms observe a public signal of a consumer’s search cost before posting a personalized price. The welfare effects of search-cost-based price discrimination depend on the distribution of search costs. For sufficiently small search costs, all consumers participate, and price discrimination reduces consumer surplus. When search costs are sufficiently dispersed, price discrimination reduces participation; its effect on consumer surplus is ambiguous and decomposed into three forces. This decomposition guides optimal information design: the consumer-surplus-maximizing policy is a binary signal that separates low- and high-search-cost consumers.

Suggested Citation

  • Laurenz Marstaller, 2026. "Privacy in Search Markets," ECONtribute Discussion Papers Series 387, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:387
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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_387_2026.pdf
    File Function: First version, 2026
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    More about this item

    Keywords

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    JEL classification:

    • 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
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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