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Régis RENAULT (THEMA – Université de Cergy Pontoise) – "Search Direction: Position Externalities and Position Bias" joint work with Simon Anderson
Time: 12:15 pm – 1:30 pm
Date: 22th of November 2017
Place: Room 3001.
Régis RENAULT (THEMA – Université de Cergy Pontoise) – “Search Direction: Position Externalities and Position Bias” joint work with Simon Anderson
Abstract: A tractable model of pricing under directed search is proposed where firms have ex ante heterogeneous demands. Equilibrium product prices are such that the marginal consumer’s surplus decreases in the order of search. Consumers always find it optimal to follow the order of search that results from whatever allocation rule used to determine firms’ positions. A firm imparts a “business stealing” externality, which harms firms that follow and a “search appeal” externality, which harms firms that precede it. Optimal rankings that achieve the maximization of joint profit, social welfare or consumer surplus are characterized by means of firm specific scores. There is typically a conflict between total industry profit and consumer welfare maximization. In a generalized second price auction, if firms differ with regards to the search appeal externality they generate, then the joint profit maximizing ordering of firms is the most robust. By contrast, if firms are heterogeneous in terms of market stealing, then the most robust ordering of firms maximizes consumer welfare.
Marie-Laure Allain (CREST – École polytechnique), Pierre Boyer (CREST – École polytechnique) & Laurent Linnemer (CREST – ENSAE ParisTech)
Link (before 19th of November 2017)