Intermediaries and consumer search

Yongmin CHEN*, Tianle ZHANG

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

2 Citations (Scopus)

Abstract

This paper discusses how intermediaries, such as a search engine and an online marketplace, may affect consumer search. We propose an analytical framework that encompasses several models of search for differentiated products, with a high-quality firm being more likely to offer a product that meets each consumer’s need. An intermediary improves consumer search efficiency by providing a search platform on which positions are sold to high-quality firms through competitive bidding. While the intermediary may admit too many or too few firms to its platform, compared to what would maximize consumer surplus or total welfare, its presence can nevertheless benefit consumers and improve welfare. However, the intermediary may reduce search efficiency when firms are differentiated only horizontally, when they sell experience or credence goods, or when the intermediary is biased (possibly due to vertical integration).
Original languageEnglish
Pages (from-to)255-277
Number of pages23
JournalInternational Journal of Industrial Organization
Volume57
Early online date12 Aug 2017
DOIs
Publication statusPublished - Mar 2018

Fingerprint

Search engines
Consumer search
Intermediaries
Vertical integration
Search engine
Firm efficiency
Differentiated products
Consumer surplus
Competitive bidding

Keywords

  • Consumer search
  • Intermediary
  • Online marketplace
  • Search engine
  • Search platform
  • Vertical differentiation

Cite this

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title = "Intermediaries and consumer search",
abstract = "This paper discusses how intermediaries, such as a search engine and an online marketplace, may affect consumer search. We propose an analytical framework that encompasses several models of search for differentiated products, with a high-quality firm being more likely to offer a product that meets each consumer’s need. An intermediary improves consumer search efficiency by providing a search platform on which positions are sold to high-quality firms through competitive bidding. While the intermediary may admit too many or too few firms to its platform, compared to what would maximize consumer surplus or total welfare, its presence can nevertheless benefit consumers and improve welfare. However, the intermediary may reduce search efficiency when firms are differentiated only horizontally, when they sell experience or credence goods, or when the intermediary is biased (possibly due to vertical integration).",
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Intermediaries and consumer search. / CHEN, Yongmin; ZHANG, Tianle.

In: International Journal of Industrial Organization, Vol. 57, 03.2018, p. 255-277.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AU - ZHANG, Tianle

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N2 - This paper discusses how intermediaries, such as a search engine and an online marketplace, may affect consumer search. We propose an analytical framework that encompasses several models of search for differentiated products, with a high-quality firm being more likely to offer a product that meets each consumer’s need. An intermediary improves consumer search efficiency by providing a search platform on which positions are sold to high-quality firms through competitive bidding. While the intermediary may admit too many or too few firms to its platform, compared to what would maximize consumer surplus or total welfare, its presence can nevertheless benefit consumers and improve welfare. However, the intermediary may reduce search efficiency when firms are differentiated only horizontally, when they sell experience or credence goods, or when the intermediary is biased (possibly due to vertical integration).

AB - This paper discusses how intermediaries, such as a search engine and an online marketplace, may affect consumer search. We propose an analytical framework that encompasses several models of search for differentiated products, with a high-quality firm being more likely to offer a product that meets each consumer’s need. An intermediary improves consumer search efficiency by providing a search platform on which positions are sold to high-quality firms through competitive bidding. While the intermediary may admit too many or too few firms to its platform, compared to what would maximize consumer surplus or total welfare, its presence can nevertheless benefit consumers and improve welfare. However, the intermediary may reduce search efficiency when firms are differentiated only horizontally, when they sell experience or credence goods, or when the intermediary is biased (possibly due to vertical integration).

KW - Consumer search

KW - Intermediary

KW - Online marketplace

KW - Search engine

KW - Search platform

KW - Vertical differentiation

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JF - International Journal of Industrial Organization

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