Information design for selling search goods and the effect of competition

Chen Lyu

Journal of Economic Theory, 2023, vol. 213, issue C

Abstract: I study optimal information provision by a search goods seller. While the seller controls a consumer's pre-search information, he cannot control post-search information because the consumer will inevitably learn the product's match after search. A relaxed problem approach is developed to solve the optimal design, which accommodates both continuous value distributions and ex-ante heterogeneous consumers with privately known outside options. The optimal design is shown to crucially depend on the outside option value distribution, and can be implemented by a simple upper-censorship signal under certain regularity conditions. Several applications are provided, including comparing information designs for search goods and experience goods, and studying the effect of competition with a large number of sellers.

Keywords: Information design; Bayesian persuasion; Search goods; Consumer search; Competition (search for similar items in EconPapers)
JEL-codes: D40 D82 D83 L10 M37 (search for similar items in EconPapers)
Date: 2023
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:jetheo:v:213:y:2023:i:c:s0022053123001187

DOI: 10.1016/j.jet.2023.105722

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