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Search Deterrence

Author

Listed:
  • 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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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Armstrong, Mark, 2016. "Ordered Consumer Search," MPRA Paper 72194, University Library of Munich, Germany.
    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. Rhodes, Andrew & Wilson, Chris, 2015. "False Advertising," TSE Working Papers 15-614, Toulouse School of Economics (TSE), revised Oct 2017.
    5. 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.
    6. Laura Doval, 2014. "Whether or not to open Pandora's box," Discussion Papers 1574, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    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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