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Prominence and Consumer Search: The Case With Multiple Prominent Firms

  • Zhou, Jidong

This paper extends Armstrong, Vickers, and Zhou (2007) to the case with multiple prominent firms. All consumers first search among prominent firms, and if their products are not satisfactory, they continue to search among non-prominent ones. Prominent firms will charge a lower price than their non-prominent rivals as in the case with a single prominent firm, but relative to the situation without any prominent firm, the presence of more than one prominent firm can induce all firms to raise their prices. We also characterize how market prices and welfare vary with the number of prominent firms.

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File URL: https://mpra.ub.uni-muenchen.de/12554/1/MPRA_paper_12554.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12554.

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Date of creation: 06 Jan 2009
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Handle: RePEc:pra:mprapa:12554
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  1. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May.
  2. Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1213-1270.
  3. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
  4. Brigitte C. Madrian & Dennis F. Shea, 2001. "THE POWER OF SUGGESTION: INERTIA IN 401(k) PARTICIPATION AND SAVINGS BEHAVIOR," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1149-1187, November.
  5. Mark Armstrong & John Vickers & Jidong Zhou, 2008. "Prominence and Consumer Search," Economics Series Working Papers 379, University of Oxford, Department of Economics.
  6. Maria Arbatskaya, 2007. "Ordered search," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 119-126, 03.
  7. Chris M. Wilson, 2008. "Ordered Search and Equilibrium Obfuscation," Economics Series Working Papers 401, University of Oxford, Department of Economics.
  8. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
  9. Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006.
  10. Wilson, Chris M., 2010. "Ordered search and equilibrium obfuscation," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 496-506, September.
  11. Perry, Motty & Wigderson, Avi, 1986. "Search in a Known Pattern," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 225-30, February.
  12. Wolinsky, Asher, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 493-511, August.
  13. Bagwell, Kyle & Ramey, Garey, 1994. "Coordination Economies, Advertising, and Search Behavior in Retail Markets," American Economic Review, American Economic Association, vol. 84(3), pages 498-517, June.
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