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Strategic Inattention in Product Search

Author

Listed:
  • Adrian Hillenbrand

    (Max Planck Institute for Research on Collective Goods)

  • Svenja Hippel

    (Max Planck Institute for Research on Collective Goods)

Abstract

Rapid technological developments in online markets fundamentally change the relationship between consumers and sellers. Online platforms can now easily gather data about the consumer and his search behavior, that allow for price discrimination. Therefore the consumers’ product search becomes a strategic choice. Consumers face a trade-off: Search intensely and receive a better fit at a potentially higher price or restrict search behavior – be strategically inattentive – and receive a worse fit, but maybe a better deal. We study the resulting strategic buyer-seller interaction theoretically as well as experimentally. Our experimental results shed a critical light on the added value for consumers through the rise of online platforms.

Suggested Citation

  • Adrian Hillenbrand & Svenja Hippel, 2017. "Strategic Inattention in Product Search," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_21, Max Planck Institute for Research on Collective Goods, revised Sep 2019.
    • Handle: RePEc:mpg:wpaper:2017_21
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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