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Sequential search and firm prominence

Author

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  • Jose A. Carrasco

    (Universidad Adolfo Ibañez)

  • Rodrigo Yañez

    (University of Wisconsin-Madison)

Abstract

We explore the role of prominence in equilibrium pricing in markets where search is sequential and random. Our model key feature is that more prominent firms are more likely to be sampled first. In contrast to ordered-search models, we find that more prominent firms inherit larger but less elastic demands, and as such have incentives to post larger prices. However, they might post lower prices but still charge higher markups than less prominent competitors only if they are also sufficiently more efficient. Our results suggest that when search is sequential, the role of prominence depends on whether it modifies the order or just the chances with which firms are sampled.

Suggested Citation

  • Jose A. Carrasco & Rodrigo Yañez, 2022. "Sequential search and firm prominence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(1), pages 209-233, July.
    • Handle: RePEc:spr:joecth:v:74:y:2022:i:1:d:10.1007_s00199-021-01363-8
    DOI: 10.1007/s00199-021-01363-8
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    More about this item

    Keywords

    Search theory; Prominence; Pricing; Oligopoly;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: 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

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