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Consumer search and firm strategy with multi-attribute products

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  • Gambato, Jacopo

Abstract

I analyze a model of directed search in which a consumer inspects a finite number of products sharing attributes with each others. The consumer discovers her valuation for the attributes of the inspected products and adapts her search strategy based on what she has learned. The consumer anticipates the optimal paths that arise after different realizations; this generates a search rule that accounts for learning systematically. In this search environment, a multiproduct seller commits to a menu of horizontally differentiated products. The seller can exploit the fact that the emerging search paths reveal the consumer's preferences: by setting different prices for ex ante identical products, the seller can encourage specific paths to arise and exploit the information that the consumer learned through search. In some cases, the seller optimally limits the set of available products.

Suggested Citation

  • Gambato, Jacopo, 2024. "Consumer search and firm strategy with multi-attribute products," ZEW Discussion Papers 24-033, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:300012
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    References listed on IDEAS

    as
    1. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    2. Charles Hodgson & Gregory Lewis, 2020. "You Can Lead a Horse to Water: Spatial Learning and Path Dependence in Consumer Search," Cowles Foundation Discussion Papers 2246, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    consumer search; directed search; learning; multiproduct monopoly; pricing; product portfolio;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • 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

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