Consumer Search With Limited Product Evaluation

Abstract

Consumers need not evaluate all available product information before making a purchase. This may arise because shopping environments prevent a full evaluation (e.g., online). We develop a model of simultaneous search in which consumers have limited ability in product evaluation in order to study the impact of search cost on prices, consumer surplus, and social welfare. If consumers are endowed with the ability to choose how much information to acquire from a searched product, they may choose limited product evaluation. We find that consumers may evaluate more firms, enjoy lower prices, and higher surplus despite this limited ability. This implies that prices can decrease and consumer surplus can increase in search costs. We then extend our setting to the case of multiproduct firms and find similar effects due to changes in within-firm search costs.

Publication Date

3-1-2016

Publication Title

Journal of Economics and Management Strategy

Volume

25

Issue

1

Number of Pages

32-55

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/jems.12131

Socpus ID

84955203503 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84955203503

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