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Search Deterrence

Author

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  • Armstrong, Mark
  • Zhou, Jidong

Abstract

This paper studies sales techniques which discourage consumer search by making it harder or more expensive to return to buy after a search for alternatives. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer when all do so. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative, and in many cases the outcome is as if the seller could only make an exploding offer. Search deterrence results in sub-optimal matching of products to consumers and often raises the price consumers pay.

Suggested Citation

  • Armstrong, Mark & Zhou, Jidong, 2014. "Search Deterrence," MPRA Paper 60891, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:60891
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    File URL: https://mpra.ub.uni-muenchen.de/60891/1/MPRA_paper_60891.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    2. Gautier, Pieter A. & Hu, Bo & Watanabe, Makoto, 2016. "Marketmaking Middlemen," IZA Discussion Papers 10152, Institute for the Study of Labor (IZA).
    3. Deb, Rahul & Said, Maher, 2015. "Dynamic screening with limited commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 891-928.
    4. Andrew Rhodes & Chris M. Wilson, 2018. "False advertising," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 348-369, June.
    5. repec:eee:jetheo:v:175:y:2018:i:c:p:127-158 is not listed on IDEAS
    6. Asker, John & Bar-Isaac, Heski, 2016. "Vertical Information Restraints: Pro- and Anti-Competitive Impacts of Minimum Advertised Price Restrictions," CEPR Discussion Papers 11579, C.E.P.R. Discussion Papers.
    7. Doval, Laura, 2018. "Whether or not to open Pandora's box," Journal of Economic Theory, Elsevier, vol. 175(C), pages 127-158.

    More about this item

    Keywords

    Consumer search; price discrimination; sequential screening; exploding offers; sales techniques;

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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