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Search Deterrence

Mark Armstrong and Jidong Zhou ()

No 661, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: A seller wishes to prevent the discovery of rival offers by its prospective customers. We study sales techniques which serve this purpose by making it harder for a customer to return to buy later after a search for alternatives. These include making an exploding offer, offering a "buy-now" discount, or requiring payment of a deposit in order to buy later. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can sufferwhen all do so. In a monopoly setting where the buyer has an uncertain outside option, the optimal selling mechanism features both buy-now discounts and deposit contracts. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative. In many cases the outcome then involves exploding offers, so that no consumers return to buy after search.

Keywords: Consumer search; sales techniques; price discrimination; sequential search (search for similar items in EconPapers)
JEL-codes: D18 D83 L13 L80 (search for similar items in EconPapers)
Date: 2013-06-27
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Search Deterrence (2016) Downloads
Working Paper: Search Deterrence (2014) Downloads
Working Paper: Search Deterrence (2013) Downloads
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