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Consumer Search, Steering, and Choice Overload

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  • Volker Nocke
  • Patrick Rey

Abstract

We develop a model of within-firm sequential, directed search and study a firm’s ability and incentive to steer consumers. We find that the firm often benefits from adopting a noisy positioning strategy, which limits the information available to consumers. This induces consumers to keep searching but discourages some of them from visiting the firm. This occurs even though the firm and the consumers have in common an interest in maximizing the probability of trade. Because of such noisy positioning, an increase in the size of the product line further discourages consumers from visiting the firm—consistent with choice overload.

Suggested Citation

  • Volker Nocke & Patrick Rey, 2024. "Consumer Search, Steering, and Choice Overload," Journal of Political Economy, University of Chicago Press, vol. 132(5), pages 1684-1739.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/728108
    DOI: 10.1086/728108
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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