Postsearch uncertainty, product heterogeneity, and price divergence

Yijuan Chen, Xiangting Hu and Sanxi Li

Journal of Economics & Management Strategy, 2024, vol. 33, issue 1, 175-202

Abstract: We develop a consumer search model in which consumers may remain uncertain about product quality even after inspecting the product. We first consider the postsearch uncertainty regarding vertical quality, and characterize the separating equilibrium in which firms with different quality levels charge different prices. If quality information is not sufficiently transparent after the search, then prices between the low‐ and the high‐quality products can either diverge or converge as the search cost decreases, depending on the degrees of horizontal and vertical product differentiation. We further extend the model to include the postsearch uncertainty about the horizontal match value and to endogenize the firm's quality choice.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jems.12561

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:33:y:2024:i:1:p:175-202

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().