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Consumer Search and Choice Overload

Author

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  • Nocke, Volker
  • Rey, Patrick

Abstract

We consider a multiproduct seller facing consumers who must search to learn prices and valuations. The equilibrium features choice overload: the larger the product line, the fewer consumers start searching. We provide conditions under which the seller offers too much or too little variety. We then allow the seller to position products or make recommendations, thereby introducing the possibility of directed search, and show that the seller may find it profitable to maintain some noise. Finally, we study the seller's incentive to disclose product identity and extend our analysis to that of a platform choosing which sellers to host.

Suggested Citation

  • Nocke, Volker & Rey, Patrick, 2021. "Consumer Search and Choice Overload," CEPR Discussion Papers 16440, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16440
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    Cited by:

    1. Sokullu, Senay, 2023. "More Is Better, Or Not? An Empirical Analysis of Buyer Preferences for Variety on the E-Market," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 450-470.

    More about this item

    Keywords

    Sequential consumer search; Product variety; Choice overload; Multiproduct firm; Platform;
    All these keywords.

    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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