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Improved Information in Search Markets

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Abstract

This paper studies how an improved information environment affects consumer search and firm competition. We find conditions for information improvement to have unambiguous impacts on search duration, price and consumer welfare. In many cases consumers benefit from information improvement regardless of how it affects the market price, but there are also cases where information improvement raises price significantly so that consumers suffer from it. Our model provides a unified way to consider the market implications of various types of information improvement such as search advertising, personalized recommendations, filtering, and VR shopping technology.

Suggested Citation

  • Jidong Zhou, 2020. "Improved Information in Search Markets," Cowles Foundation Discussion Papers 2264, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2264
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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. José L. Moraga-González & Yajie Sun, 2023. "Product Quality and Consumer Search," American Economic Journal: Microeconomics, American Economic Association, vol. 15(1), pages 117-141, February.
    3. Liu, Lin & Wang, X. Henry, 2021. "Product differentiation and equilibrium price with partial product search," Economics Letters, Elsevier, vol. 205(C).
    4. Mark Whitmeyer, 2020. "Persuasion Produces the (Diamond) Paradox," Papers 2011.13900, arXiv.org, revised Apr 2021.

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    More about this item

    Keywords

    Consumer search; Price competition; Information improvement;
    All these keywords.

    JEL classification:

    • 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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