Information Provision and Consumer Search

Jay Lu and Simon Board

No 1427, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Buyers often search across multiple retailers or websites to learn which product best fits their needs. We study how sellers manage these search incentives through their disclosure policies (e.g. advertisements, product trials and reviews), and ask whether competition leads sellers to provide more information. We first show that if sellers can track buyers (e.g. they can observe buyers' search history via their cookies), then in a broad range of environments, there is a unique equilibrium in which all sellers provide the 'monopoly level' of information. However, if buyers are anonymous and the search cost is small, then all sellers provide full information about their products. Tracking software thus enables sellers to implicitly collude, providing a motivation for regulation.

Date: 2015
New Economics Papers: this item is included in nep-com, nep-dge and nep-mkt
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