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Multiproduct search

Zhou, Jidong (2011): Multiproduct search.

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Abstract

This paper presents a sequential search model where consumers look for sev- eral products from multiproduct �rms. In a multiproduct search market, both consumer behavior and �rm behavior are di¤erent from the single-product case. For example, a consumer may return to previously visited �rms before running out of options, and prices can decrease with search costs. The framework is ex- tended by allowing �rms to use bundling strategies. Bundling tends to reduce the intensity of consumer search, which can soften competition and reverse the usual welfare assessment of competitive bundling in a perfect information setting. Applications to countercyclical pricing, loss leader pricing, and endogenous retail market structure are also discussed.

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