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Information Provision and Consumer Search

Author

Listed:
  • Jay Lu

    (Cornell University)

  • Simon Board

    (University of California - Los Angeles)

Abstract

Buyers often search across multiple retailers or websites to learn which product best fits their needs. We study how sellers manage these search incentives through their disclosure policies (e.g. advertisements, product trials and reviews), and ask whether competition leads sellers to provide more information. We first show that if sellers can track buyers (e.g. they can observe buyers' search history via their cookies), then in a broad range of environments, there is a unique equilibrium in which all sellers provide the 'monopoly level' of information. However, if buyers are anonymous and the search cost is small, then all sellers provide full information about their products. Tracking software thus enables sellers to implicitly collude, providing a motivation for regulation.

Suggested Citation

  • Jay Lu & Simon Board, 2015. "Information Provision and Consumer Search," 2015 Meeting Papers 1427, Society for Economic Dynamics.
  • Handle: RePEc:red:sed015:1427
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    File URL: https://economicdynamics.org/meetpapers/2015/paper_1427.pdf
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    References listed on IDEAS

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    1. Asher Wolinsky, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 493-511.
    2. Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-327, May.
    3. Sourav Bhattacharya & Arijit Mukherjee, 2013. "Strategic information revelation when experts compete to influence," RAND Journal of Economics, RAND Corporation, vol. 44(3), pages 522-544, September.
    4. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    5. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    6. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    7. Jidong Zhou, 2014. "Multiproduct Search and the Joint Search Effect," American Economic Review, American Economic Association, vol. 104(9), pages 2918-2939, September.
    8. Simon Board & Marek Pycia, 2014. "Outside Options and the Failure of the Coase Conjecture," American Economic Review, American Economic Association, vol. 104(2), pages 656-671, February.
    9. Andrew Rhodes, 2015. "Multiproduct Retailing," Review of Economic Studies, Oxford University Press, vol. 82(1), pages 360-390.
    10. repec:pit:wpaper:453 is not listed on IDEAS
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    Cited by:

    1. Strulik, Holger, 2019. "I shouldn’t eat this donut: Self-control, body weight, and health in a life cycle model," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).

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