Escaping search when buying

Vaiva Petrikaitė

International Journal of Industrial Organization, 2022, vol. 82, issue C

Abstract: This paper studies a duopoly with horizontally differentiated products and costly sequential consumer search. Prices are posted and search costs must be paid to observe the match values of goods. Consumers choose both in what order to inspect the products and whether to inspect the goods before purchasing. When the expected match value is relatively high, consumers always consider the cheaper product first. However if the expected match value is low, then consumers may check the more expensive product first. The fact that a consumer may buy a product without inspection softens price competition. As a result, the comparative statics of prices and surplus division with respect to search costs is different from that of a sequential search model with observable prices.

Keywords: Consumer search; Horizontal differentiation; Price competition (search for similar items in EconPapers)
JEL-codes: D21 D43 D83 L13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:82:y:2022:i:c:s0167718722000042

DOI: 10.1016/j.ijindorg.2022.102828

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