Munich Personal RePEc Archive

Search Deterrence

Armstrong, Mark and Zhou, Jidong (2013): Search Deterrence.

[img]
Preview
PDF
MPRA_paper_48568.pdf

Download (357kB) | Preview

Abstract

A seller wishes to prevent the discovery of rival offers by its prospective customers. We study sales techniques which serve this purpose by making it harder for a customer to return to buy later after a search for alternatives. These include making an exploding offer, offering a "buy-now" discount, or requiring payment of a deposit in order to buy later. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer when all do so. In a monopoly setting where the buyer has an uncertain outside option, the optimal selling mechanism features both buy-now discounts and deposit contracts. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative. In many cases the outcome then involves exploding offers, so that no consumers return to buy after search.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.