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Multiproduct search

Author

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  • Zhou, Jidong

Abstract

This paper presents a sequential search model where consumers look for several products among competitive multiproduct �rms. In a multiproduct search mar- ket, both consumer behavior and �rm behavior exhibit di¤erent features from the single-product case: a consumer often returns to previously visited �rms before running out of options; and prices can decrease with search costs and increase with the number of �rms. The framework is then extended in two directions. First, by introducing both single-product and multiproduct searchers, the model can explain the phenomenon of countercyclical pricing, i.e., prices of many retail products decline during peak-demand periods. Second, by allowing �rms to use bundling strategies, the model sheds new light on how bundling a¤ects market performance. In a search environment, bundling tends to reduce consumer search intensity, which can soften competition and reverse the usual welfare assessment of competitive bundling in a perfect information setting.

Suggested Citation

  • Zhou, Jidong, 2011. "Multiproduct search," MPRA Paper 37139, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37139
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    File URL: https://mpra.ub.uni-muenchen.de/41702/1/MPRA_paper_41702.pdf
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    References listed on IDEAS

    as
    1. John Thanassoulis, 2007. "Competitive Mixed Bundling and Consumer Surplus," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 437-467, June.
    2. Shelegia, Sandro, 2012. "Multiproduct pricing in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 231-242.
    3. Armstrong, Mark & Zhou, Jidong, 2010. "Exploding offers and buy-now discounts," MPRA Paper 22531, University Library of Munich, Germany.
    4. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
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    6. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 352-369.
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    8. MacDonald, James M, 2000. "Demand, Information, and Competition: Why Do Food Prices Fall at Seasonal Demand Peaks?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 27-45, March.
    9. Barry Nalebuff, 2000. "Competing Against Bundles," Yale School of Management Working Papers ysm157, Yale School of Management.
    10. Rhodes, Andrew, 2011. "Multiproduct pricing and the Diamond Paradox," MPRA Paper 32511, University Library of Munich, Germany.
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    12. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-654, May.
    13. Chen, Yongmin, 1997. "Equilibrium Product Bundling," The Journal of Business, University of Chicago Press, vol. 70(1), pages 85-103, January.
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    17. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
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    Citations

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    Cited by:

    1. Moraga-González, José L. & Sándor, Zsolt & Wildenbeest, Matthijs R., 2014. "Prices, Product Differentiation, And Heterogeneous Search Costs," IESE Research Papers D/1097, IESE Business School.
    2. Shelegia, Sandro, 2012. "Multiproduct pricing in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 231-242.
    3. Antonio Rosato, 2016. "Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 709-733, August.
    4. Rhodes, Andrew, 2011. "Multiproduct pricing and the Diamond Paradox," MPRA Paper 32511, University Library of Munich, Germany.
    5. Huck, Steffen & Zhou, Jidong, 2011. "Consumer behavioural biases in competition: A survey," MPRA Paper 31794, University Library of Munich, Germany.

    More about this item

    Keywords

    consumer search; oligopoly; multiproduct pricing; countercyclical pricing; bundling;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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