Competition, Persuasion, and Search

Teddy Mekonnen and Bobak Pakzad-Hurson

Papers from arXiv.org

Abstract: An agent engages in sequential search and learns about the quality of sampled goods through signals purchased from profit-maximizing information broker(s). We study how the market structure--the number of competing brokers--shapes the pricing and design of information, as well as the resulting welfare outcomes. We characterize the equilibrium payoff set, and show that when the agent's search cost falls below a threshold, market structure affects neither how much surplus is generated in equilibrium nor how it is divided. Above this threshold, however, competition yields equilibrium outcomes that raise the agent's payoff but reduce total surplus relative to any monopoly equilibrium outcome. Methodologically, we extend the classic theory of repeated games to stopping problems, such as sequential search.

Date: 2024-11, Revised 2025-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-mac and nep-mic
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