Improved Information in Search Markets

Jidong Zhou ()

No 2264R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: How will an improved information environment affects competition and market performance when consumers face search frictions? This paper provides a unified way to model information improvement that makes the search pool more ``selective" (e.g., due to personalized recommendations), or more ``informative" (e.g., due to the availability of more detailed product information). Information improvement tends to induce consumers to search less, intensify price competition and benefit consumers, if the search friction is small, or if information improvement truncates the match utility distribution from below. More generally, however, it is also possible for information improvement to raise the market price and harm consumers.

Keywords: consumer search; personalized recommendations; information improvement; price competition (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-11, Revised 2022-06
New Economics Papers: this item is included in nep-com, nep-mic, nep-reg and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Improved Information in Search Markets (2020)
Working Paper: Improved Information in Search Markets (2020)
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