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Partial sequential search and product differentiation

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  • Liu, Lin
  • Wang, X. Henry

Abstract

Anderson and Renault (1999) show that when search cost is needed to evaluate any product, a U-shaped relationship exists between equilibrium price and product differentiation. This paper revisits this relationship by incorporating partial-depth search in a sequential search process which allows consumers to evaluate a subset of product attributes. We show that, when search depth is endogenous, the relationship is either always positive or N-shaped, depending on the elasticity of the hazard rate function of utility distribution.

Suggested Citation

  • Liu, Lin & Wang, X. Henry, 2023. "Partial sequential search and product differentiation," Economics Letters, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:ecolet:v:225:y:2023:i:c:s0165176523000915
    DOI: 10.1016/j.econlet.2023.111066
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    References listed on IDEAS

    as
    1. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 107-120.
    2. Lin Liu & Anthony Dukes, 2016. "Consumer Search with Limited Product Evaluation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(1), pages 32-55, March.
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    6. Yuxin Chen & Lin Liu & X. Henry Wang & Haojun Yu, 2022. "A Sequential Search Model with Partial Depth Evaluation," Working Papers 2201, Department of Economics, University of Missouri.
    7. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    8. An, Mark Yuying, 1998. "Logconcavity versus Logconvexity: A Complete Characterization," Journal of Economic Theory, Elsevier, vol. 80(2), pages 350-369, June.
    9. Liu, Lin & Wang, X. Henry & Yu, Haojun, 2022. "Sequential search with partial depth," Economics Letters, Elsevier, vol. 216(C).
    10. Liu, Lin & Wang, X. Henry, 2021. "Product differentiation and equilibrium price with partial product search," Economics Letters, Elsevier, vol. 205(C).
    11. Fernando Branco & Monic Sun & J. Miguel Villas-Boas, 2012. "Optimal Search for Product Information," Management Science, INFORMS, vol. 58(11), pages 2037-2056, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Consumer search; Partial-depth search; Product differentiation; Pricing;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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