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Attraction Via Prices and Information

Author

Listed:
  • Pak Hung Au
  • Mark Whitmeyer
Abstract
We study the ramifications of increased commitment power for information provision in an oligopolistic market with search frictions. Although prices are posted and, therefore, guide search, if firms cannot commit to information provision policies, there is no active search at equilibrium so consumers visit (and purchase from) at most one firm. If firms can guide search by both their prices and information policies, there exists a unique symmetric equilibrium exhibiting price dispersion and active search. Nevertheless, when the market is thin, consumers prefer the former case, which features intense price competition. Firms always prefer the latter.

Suggested Citation

  • Pak Hung Au & Mark Whitmeyer, 2024. "Attraction Via Prices and Information," Papers 2402.11754, arXiv.org.
    • Handle: RePEc:arx:papers:2402.11754
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    References listed on IDEAS

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    1. Mustafa Dogan & Ju Hu, 2022. "Consumer search and optimal information," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 386-403, June.
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    8. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    9. Pak Hung Au & Mark Whitmeyer, 2023. "Attraction versus Persuasion: Information Provision in Search Markets," Journal of Political Economy, University of Chicago Press, vol. 131(1), pages 202-245.
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