Publication Date: November 2020
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, L13CFDP 2264R