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Consumer search and optimal information

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  • Mustafa Dogan
  • Ju Hu

Abstract

This article studies an information design problem in a sequential consumer search environment. Consumers, whose valuation of firms' products is uncertain, observe a noisy signal about the valuation upon being matched with a firm. The goal is to characterize those signal structures that maximize consumer surplus. We show that the consumer‐optimal signal structure can be found within the class of conditional unit‐elastic demand signal distributions. A rich set of properties and comparative statics of the consumer‐optimal signal distributions are also derived.

Suggested Citation

  • Mustafa Dogan & Ju Hu, 2022. "Consumer search and optimal information," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 386-403, June.
    • Handle: RePEc:bla:randje:v:53:y:2022:i:2:p:386-403
    DOI: 10.1111/1756-2171.12411
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    References listed on IDEAS

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    11. Kolotilin, Anton, 2018. "Optimal information disclosure: a linear programming approach," Theoretical Economics, Econometric Society, vol. 13(2), May.
    12. Michael Choi & Kyungmin Kim & Marilyn Pease, 2019. "Optimal Information Design for Search Goods," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 550-556, May.
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    Cited by:

    1. Yongmin Chen, 2024. "Search and Competition Under Product Quality Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 633-661, June.
    2. Brian C. Albrecht & Mark Whitmeyer, 2023. "Comparison Shopping: Learning Before Buying From Duopolists," Papers 2302.06580, arXiv.org, revised Apr 2023.
    3. Pak Hung Au & Mark Whitmeyer, 2024. "Attraction Via Prices and Information," Papers 2402.11754, arXiv.org.
    4. Lyu, Chen, 2023. "Information design for selling search goods and the effect of competition," Journal of Economic Theory, Elsevier, vol. 213(C).
    5. Teddy Mekonnen & Zeky Murra-Anton & Bobak Pakzad-Hurson, 2023. "Persuaded Search," Papers 2303.13409, arXiv.org, revised Aug 2024.

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