Multiproduct search

Zhou, Jidong (2011): Multiproduct search.

Abstract

This paper presents a sequential search model where consumers look for several products among competitive multiproduct �rms. In a multiproduct search mar- ket, both consumer behavior and �rm behavior exhibit di¤erent features from the single-product case: a consumer often returns to previously visited �rms before running out of options; and prices can decrease with search costs and increase with the number of �rms. The framework is then extended in two directions. First, by introducing both single-product and multiproduct searchers, the model can explain the phenomenon of countercyclical pricing, i.e., prices of many retail products decline during peak-demand periods. Second, by allowing �rms to use bundling strategies, the model sheds new light on how bundling a¤ects market performance. In a search environment, bundling tends to reduce consumer search intensity, which can soften competition and reverse the usual welfare assessment of competitive bundling in a perfect information setting.

• Item Type: MPRA Paper
• Language: English
• Keywords: consumer search, oligopoly, multiproduct pricing, countercyclical pricing, bundling
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

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