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Prominence and Consumer Search: The Case With Multiple Prominent Firms

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Author Info
Zhou, Jidong

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Abstract

This paper extends Armstrong, Vickers, and Zhou (2007) to the case with multiple prominent firms. All consumers first search among prominent firms, and if their products are not satisfactory, they continue to search among non-prominent ones. Prominent firms will charge a lower price than their non-prominent rivals as in the case with a single prominent firm, but relative to the situation without any prominent firm, the presence of more than one prominent firm can induce all firms to raise their prices. We also characterize how market prices and welfare vary with the number of prominent firms.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12554.

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Date of creation: 06 Jan 2009
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Handle: RePEc:pra:mprapa:12554

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Related research
Keywords: consumer search; marketing; prominence; product differentiation;

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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References listed on IDEAS
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  1. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May. [Downloadable!] (restricted)
    Other versions:
  2. Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006. [Downloadable!]
  3. Wolinsky, Asher, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 493-511, August. [Downloadable!] (restricted)
  4. Mark Armstrong & John Vickers & Jidong Zhou, 2008. "Prominence and Consumer Search," Economics Series Working Papers 379, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  5. Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Perry, Motty & Wigderson, Avi, 1986. "Search in a Known Pattern," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 225-30, February. [Downloadable!] (restricted)
  7. Kyle Bagwell & Garey Ramey, 1992. "Coordination Economies, Advertising and Search Behavior in Retail Markets," University of California at San Diego, Economics Working Paper Series 92-05, Department of Economics, UC San Diego.
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  8. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October. [Downloadable!] (restricted)
  9. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March. [Downloadable!]
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  10. Susan Athey & Glenn Ellison, 2007. "Position Auctions with Consumer Search," Levine's Bibliography 122247000000001633, UCLA Department of Economics. [Downloadable!]
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  11. Chris M. Wilson, 2008. "Ordered Search and Equilibrium Obfuscation," Economics Series Working Papers 401, University of Oxford, Department of Economics. [Downloadable!]
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