Persuaded Search

Teddy Mekonnen, Zeky Murra-Anton and Bobak Pakzad-Hurson

Journal of Political Economy, 2025, vol. 133, issue 10, 3167 - 3207

Abstract: We consider sequential search by an agent who cannot observe the quality of goods but can acquire information from a profit-maximizing principal with limited commitment power. The principal can charge higher prices for more informative signals, but high future prices discourage continued search, thereby reducing the principal’s profits. A unique stationary equilibrium outcome exists: the principal (i) sells the agent only partial information, (ii) induces the socially efficient stopping rule, and (iii) extracts the full surplus. However, introducing an additional, free source of information can lead to inefficiency in equilibrium.

Date: 2025
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