Consumer Search with Repeat Purchases

We study the impacts of repeat purchases on consumer search and price competition in an overlapping generations model. Search incentives are higher for “new” consumers and lower for “old” consumers in each generation, which changes price competition directly for these consumers and also indirectly through intertemporal rivalry. There exist two types of consumer loyalty, with remarkably different competitive effects. Relative to the single-purchase benchmark, equilibrium price is lower when brand preference is unlikely to persist, but higher when discount factors are relatively low.