CFDP 2264

Improved Information in Search Markets

Publication Date: November 2020

Pages: 26

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.

Keywords: Consumer search, Price competition, Information improvement

JEL Classification Codes:  D43, D83, L13

JEL Classification Codes: D43D83L13

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