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Search Deterrence

  • Mark Armstrong
  • Jidong Zhou

A seller wishes to prevent the discovery of rival offers by its prospective customers.� We study sales techniques which serve this purpose by making it harder for a customer to return to buy later after a search for alternatives.� These include making an exploding offer, offering a "buy-now" discount, or requiring payment of a deposit in order to buy later.� It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer�when all do so.� In a monopoly setting where the buyer has an uncertain outside option, the optimal selling mechanism features both buy-now discounts and deposit contracts.� When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative.� In many cases the outcome then involves exploding offers, so that no consumers return to buy after search.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 661.

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Date of creation: 27 Jun 2013
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Handle: RePEc:oxf:wpaper:661
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