Consumer search with blind buying

• 成果类型: Article
• 署名作者: Chen, Yanbin; Li, Sanxi; Lin, Kai; Yu, Jun
• 署名单位: Renmin University of China; Renmin University of China; Shanghai University of Finance & Economics
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2021.01.009
• 发表日期: 2021
• 页码: 402-427
• 关键词: consumer search; Blind buying; Observable price; search cost; prominence

摘要

This article studies a sequential search model in which consumers can purchase a product without incurring a search cost to inspect the match value, which we call blind buying. We show that the optimal search policy is no longer as per Weitzman (1979). When the match value has a symmetric distribution, both consumers and firms are indifferent to the search order, conditional on that blind buying does not take place in the first stage. Blind buying always increases total welfare, and increases market prices and industrial profits if and only if the first-sample search cost is below a threshold value. An increase in the search cost reduces equilibrium prices. Such a result is consistent with existing price-directed search models, but the underlying mechanisms are different. We also show that being prominent can adversely affect a firm if the match value is asymmetrically distributed, which contrasts the literature. (C) 2021 Elsevier Inc. All rights reserved.