Monday, December 19, 2016

Ordered Consumer Search

Mark Armstrong, Oxford analyzes Ordered Consumer Search.

ABSTRACT: The paper discusses situations in which consumers search through their options in a deliberate order, in contrast to more familiar models with random search. Topics include: the existence of ordered search equilibria with symmetric sellers (all consumers first inspect the seller they anticipate sets the lowest price, and a seller which is inspected first by consumers will set the lowest price); the use of price and non-price advertising to direct search; the impact of consumers starting a new search at their previous supplier; and the incentive a seller can have to raise its own search cost. I also show how ordered search can be reformulated as a simpler discrete choice problem without search frictions or dynamic decision making.

https://lawprofessors.typepad.com/antitrustprof_blog/2016/12/ordered-consumer-search.html

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