Prominence and consumer search

Mark Armstrong, John Vickers and Jidong Zhou ()

RAND Journal of Economics, 2009, vol. 40, issue 2, 209-233

Abstract: This article examines the implications of “prominence” in search markets. We model prominence by supposing that the prominent firm will be sampled first by all consumers. If there are no systematic quality differences among firms, we find that the prominent firm will charge a lower price than its less prominent rivals. Making a firm prominent will typically lead to higher industry profit but lower consumer surplus and welfare. The model is extended by introducing heterogeneous product qualities, in which case the firm with the highest‐quality product has the greatest incentive to become prominent, and making it prominent will boost industry profit, consumer surplus, and welfare.

Date: 2009
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Citations: View citations in EconPapers (185)

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https://doi.org/10.1111/j.1756-2171.2009.00062.x

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Working Paper: Prominence and Consumer Search (2008)
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