Competitive search obfuscation

Saara Hämäläinen

Journal of Economic Dynamics and Control, 2018, vol. 97, issue C, 38-63

Abstract: “Obfuscation” is a literature term referring to sales practices which increase the costs consumers pay to search. How does competition shape it? How does it shape competition? To address these questions, we develop a model where each firm can freely commit to any observable degree of search obfuscation, which pins down the time cost of searching its product. Consumers have limited time for browsing around websites. This endogenizes consumer information and competition intensity and gives clear predictions about market welfare and surplus division. We find that competition for prominence and the fear of frustrating consumers keeps the negative welfare effects of obfuscation low. However, because obfuscation reduces price awareness and differentiation relaxes price competition, the obfuscation choices in the unique equilibrium are persistently positive and different.

Keywords: Obfuscation; Intrafirm frictions; Time cost; Deadlines; Prominence; Consumer information; Competition intensity; Diamond equilibrium; Bertrand equilibrium (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:97:y:2018:i:c:p:38-63

DOI: 10.1016/j.jedc.2018.10.003

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