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Informative Advertising, Consumer Search and Transparency Policy (Job Market Paper)
| Content Provider | CiteSeerX |
|---|---|
| Author | Wang, Chengsi Morita, Hodaka Pimienta, Carlos |
| Abstract | Information about a new or non-frequently purchased product is often produced by both sides of the market. We construct a monopoly pricing model consisting of both seller’s information disclosure and consumer’s information acquisition. The presence of consumer search, which lowers the probability of making sales, creates incentive for the monopolist to deter search. In contrast with most previous literature, we show that, partial information disclosure arises in equilibrium when the search cost is low. As the search cost increases to medium level, the monopolist hides information but lowers the price to prevent consumers from searching. When the search cost is very high, the monopolist charges high price and hides information. The equilibrium price is thus non-monotonic in search cost. Information disclosure and consumer search co-exist only when the search cost is low, and thus complement each other. We show that transparency policies on advertising cannot improve social welfare. Nevertheless, they benefit consumers in a wide range of values of the search costs by improving matching quality and reducing the expense of searching. But for some medium levels of search costs, transparency policies hurt consumers due to the induced high price in equilibrium. |
| File Format | |
| Access Restriction | Open |
| Subject Keyword | Search Cost Transparency Policy Consumer Search Informative Advertising Job Market Paper Social Welfare Matching Quality Partial Information Disclosure Previous Literature Wide Range Consumer Information Acquisition Induced High Price Monopoly Pricing Model Consisting Purchased Product Advertising Cannot Search Cost Increase Medium Level Consumer Search Co-exist Monopolist Charge High Price Information Disclosure Hide Information Seller Information Disclosure Equilibrium Price |
| Content Type | Text |
