Abstract
In this paper, we develop a model of within-firm sequential, directed search and study a firm’s ability and incentive to steer consumers. The paper’s main insight is that the firm often benefits from garbling the information it provides to consumers. This induces consumers to keep searching but discourages some of them from visiting the firm—a form of garbling overload. The incentive to garble the information arises even though the firm and the consumers have in common the interest of maximizing the probability of trade—in particular, the setting abstracts from any self-preferencing or bias in favor of particular products. Because of information garbling, an increase in the size of the product line further discourages consumers from visiting the firm—consistent with choice overload.
Keywords
Sequential consumer search; product variety; choice overload; multi-product firm; platform;
JEL codes
- L12: Monopoly • Monopolization Strategies
- L15: Information and Product Quality • Standardization and Compatibility
- D42: Monopoly
Replaces
Volker Nocke, and Patrick Rey, “Consumer Search and Choice Overload”, TSE Working Paper, n. 21-1239, August 2021, revised October 2022.
Replaced by
Volker Nocke, and Patrick Rey, “Consumer Search and Choice Overload”, TSE Working Paper, n. 21-1239, August 2021, revised October 2022.
Reference
Volker Nocke, and Patrick Rey, “Consumer Search and Choice Overload”, TSE Working Paper, n. 21-1239, August 2021, revised October 2022.
See also
Published in
TSE Working Paper, n. 21-1239, August 2021, revised October 2022