Optimal Information Design for Search Goods

Michael Choi, Kyungmin Kim and Marilyn Pease

AEA Papers and Proceedings, 2019, vol. 109, 550-56

Abstract: We consider a monopoly pricing problem in which a consumer with an uncertain valuation of a search good receives a signal of value before deciding whether to visit the seller. She discovers her true value upon visiting and before purchase. We characterize the consumer-optimal and seller-worst signals in such an environment and deliver two main insights. First, both the consumer-optimal and seller-worst signals generate a unit-elastic demand. Second, the two signals coincide if and only if visitation costs are sufficiently small.

JEL-codes: D42 D82 D83 L12 L15 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/pandp.20191101
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Citations: View citations in EconPapers (12)

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