We study the interplay between quality provision and consumer search in a search market where firms may design products of inferior quality to promote them to naive consumers who fail to fully understand product characteristics. We derive an equilibrium in which both superior and inferior...

We study the implications of biased consumer beliefs for search market outcomes in the seminal framework due to Diamond (1971). Biased consumers base their search strategy on a belief function which specifies for any (true) distribution of utility offers in the market a possibly incorrect...

Consumers often complain that retail prices respond faster to increases in wholesale prices than to decreases. Despite many empirical studies confirming this "Rockets-and-Feathers" phenomenon for different industries, the mechanism driving it is not well understood. In this paper, we show that,...

Researchers are increasingly able to observe consumers’ behavior prior to a purchase, such as their navigation through a store or website and the products they consider. Such pre-purchase (or search) data can be valuable to researchers in a variety of ways: as an additional source of...

We study a consumer non-sequential search oligopoly model with search cost heterogeneity. We first prove that an equilibrium in mixed strategies always exists. We then examine the nonparametric identification and estimation of the costs of search. We find that the sequence of points on the...

In a recent paper Hong and Shum [2006. Using price distributions to estimate search costs. Rand Journal of Economics 37, 257–275] present a structural method to estimate search cost distributions. We extend their approach to the case of oligopoly and present a new maximum likelihood method to...

This study constructs a sequential consumer search model with differentiated products in which some consumers search for a single product while the others search for multiple products. When the mass of consumers who demand one of the products decreases, the price for one product decreases while...

In many markets buyers are poorly informed about which firms sell the product (product availability) and prices, and therefore have to spend time to obtain this information. In contrast, sellers typically have a better idea about which rivals offer the product. Information asymmetry between...

In markets with search frictions, consumers can acquire information about goods either through costly search or from friends via word-of-mouth (WOM) communication. How do sellers’ market power react to a very large increase in the number of consumers’ friends with whom they engage in WOM?...