Consumer Price Search and Platform Design in Internet Commerce

Michael Dinerstein, Liran Einav, Jonathan Levin and Neel Sundaresan

American Economic Review, 2018, vol. 108, issue 7, 1820-59

Abstract: The platform design, the process that helps potential buyers on the internet navigate toward products they may purchase, plays a critical role in reducing search frictions and determining market outcomes. We study a key trade-off associated with two important roles of efficient platform design: guiding consumers to their most desired product while also strengthening seller incentives to lower prices. We use simple theory to illustrate this, and then combine detailed browsing data from eBay and an equilibrium model of consumer search and price competition to quantitatively assess this trade-off in the particular context of a change in eBay's marketplace design.

JEL-codes: D12 D44 D83 L81 L86 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20171218
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Citations: View citations in EconPapers (76)

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Related works:
Working Paper: Consumer Price Search and Platform Design in Internet Commerce (2014)
Working Paper: Consumer Price Search and Platform Design in Internet Commerce (2014)
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