Antitrust & Competition Policy Blog

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University of Florida
Levin College of Law

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Monday, January 6, 2014

The Effects of Product Innovation on Online Search and Choice

Jun B. Kim, HKUST Business School, Paulo Albuquerque, Simon Business School, University of Rochester and Bart J. Bronnenberg, CentER, Tilburg University describe The Effects of Product Innovation on Online Search and Choice.

ABSTRACT: We present a joint model of consumer online search and choice decisions. In this model, consumers construct a choice set guided by incremental benefits and costs of search and then make their choice from this set. Our framework allows that product popularity in search differs from that in choice by explicitly modeling pre-choice consumer uncertainty. We empirically apply our approach to aggregate search and choice data from the camcorder category at Amazon.com. We find that consumers are more uncertain about newer and technically innovative products without necessarily liking them better, which leads to more search but not to more choice given search. We also demonstrate how consumer review information such as the number of reviews impacts product uncertainty and search. Finally, we illustrate how the proposed model helps manufacturers make decisions regarding the adoption of a new feature in their product line.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/01/the-effects-of-product-innovation-on-online-search-and-choice.html

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