Search Deterrence

Armstrong, Mark and Zhou, Jidong (2014): Search Deterrence.

Abstract

This paper studies sales techniques which discourage consumer search by making it harder or more expensive to return to buy after a search for alternatives. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer when all do so. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative, and in many cases the outcome is as if the seller could only make an exploding offer. Search deterrence results in sub-optimal matching of products to consumers and often raises the price consumers pay.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer search, price discrimination, sequential screening, exploding offers, sales techniques
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D18 - Consumer Protection; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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