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Attraction versus Persuasion: Information Provision in Search Markets

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  • Pak Hung Au
  • Mark Whitmeyer

Abstract

We consider a model of oligopolistic competition in a market with search frictions, in which competing firms with products of unknown quality advertise how much information a consumer's visit will glean. In the unique symmetric equilibrium of this game, the countervailing incentives of attraction and persuasion yield a payoff function for each firm that is linear in the firm's realized effective value. If the expected quality of the products is sufficiently high (or competition is sufficiently fierce), this corresponds to full information--firms provide the first-best level of information. If not, this corresponds to information dispersion--firms randomize over signals.

Suggested Citation

  • Pak Hung Au & Mark Whitmeyer, 2018. "Attraction versus Persuasion: Information Provision in Search Markets," Papers 1802.09396, arXiv.org, revised May 2022.
    • Handle: RePEc:arx:papers:1802.09396
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    References listed on IDEAS

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    Cited by:

    1. Mark Whitmeyer, 2018. "Dynamic Competitive Persuasion," Papers 1811.11664, arXiv.org, revised Dec 2023.

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