Sources of Consumer Information

Koessler, Frédéric and Renault, Régis

No 20694, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A buyer can learn about a product through search or seller-disclosed information. We examine how lower search costs or better seller disclosure affects this interaction. Whereas a drop in search costs improves consumer surplus and decreases profit when the seller can resort to an optimal disclosure strategy, its impact is ambiguous if the seller is unable to provide information. When it is unlikely that the buyer's valuation is below marginal cost, the buyer does not benefit from optimal information disclosure if search costs are high. With such high search costs and no disclosure both parties can be better off than with lower search costs and optimal information disclosure. The seller then adopts a mass market strategy where she posts a low enough price so the buyer always purchases the product without search. By contrast, if it is sufficiently likely that the buyer's valuation is below marginal cost, then the buyer can benefit from sophisticated information disclosure for relatively low search costs. The corresponding outcome is better for both parties than an environment with higher search costs and no information disclosure. The optimal seller strategy targets a niche of high-valuation buyers and prevents wasteful search by buyers with low valuations.

Keywords: Information design; Information acquisition; Advertising; Consumer search (search for similar items in EconPapers)
JEL-codes: D42 D82 D83 (search for similar items in EconPapers)
Date: 2025-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20694 (application/pdf)

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:cpr:ceprdp:20694

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20694

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().