Abstract:
The paper surveys various forms of ordered consumer search, taking as its starting point Weitzman's famous "Pandora's rule". This search problem can be reformulated as a discrete choice problem without search frictions. Topics discussed include: network effects (consumers may be better off following the same search order as other consumers); the use of advertising to coordinate on a search order; the impact of consumers starting a new search with their previous supplier; the incentive sellers have to merge or co-locate with other sellers; the incentive a seller has to raise its own search cost; and the impact of price advertising.
Host: Bård Harstad