Search Diversion

We consider a Hotelling model to deal with search diversion as a continuous variable for complements and substitutes. We examine a fixed gain from trade for complements and substitutes and endogenize the gain from trade. We propose the multi-demand model with linear demand. Further, we model the search diversion as advertising. We identify the conditions under which the equilibrium diversion is socially efficient, excessive, or insufficient. We also analyze the effect of diversion on firms' profits and consumer surplus