Privacy in Search Markets

Laurenz Marstaller ()
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Laurenz Marstaller: University of Bonn

No 387, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: Heterogeneous search costs enable price discrimination, which I study in the canonical Wolinsky (1986) sequential search setting. Firms observe a public signal of a consumer’s search cost before posting a personalized price. The welfare effects of search-cost-based price discrimination depend on the distribution of search costs. For sufficiently small search costs, all consumers participate, and price discrimination reduces consumer surplus. When search costs are sufficiently dispersed, price discrimination reduces participation; its effect on consumer surplus is ambiguous and decomposed into three forces. This decomposition guides optimal information design: the consumer-surplus-maximizing policy is a binary signal that separates low- and high-search-cost consumers.

Keywords: Privacy; Price Discrimination; Search Costs; Consumer Search Market (search for similar items in EconPapers)
JEL-codes: D18 D43 D83 L13 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2026-01
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:387

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