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Prominence and Consumer Search

Author

Listed:
  • Mark Armstrong
  • John Vickers
  • Jidong Zhou

Abstract

This paper examines the implications of "prominence" in search markets. We model prominence by supposing that the prominent firm will be sampled first by all consumers. If there are no systematic quality differences among firms, we find that the prominent firm will charge a lower price than its non-prominent rivals. The impact of making a firm prominent is that it will typically lead to higher industry profit but lower consumer surplus and welfare. The model is extended by introducing heterogeneous product qualities, in which case the firm with the highest-quality product has the greatest incentive to become prominent, and making it prominent will boost industry profit, consumer surplus and welfare.

Suggested Citation

  • Mark Armstrong & John Vickers & Jidong Zhou, 2008. "Prominence and Consumer Search," Economics Series Working Papers 379, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:379
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper379.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Consumer Search; Marketing; Prominent Display; Product Differentiation;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

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