Abstract

http://ssrn.com/abstract=1481333
 
 

Citations (5)



 


 



Search, Design and Market Structure


Heski Bar-Isaac


University of Toronto - Rotman School of Management

Guillermo Caruana


Centre for Monetary and Financial Studies (CEMFI)

Vicente Cuñat


London School of Economics & Political Science (LSE) - Financial Markets Group

September 1, 2009

NET Institute Working Paper No. 09-17

Abstract:     
The Internet has made consumer search much easier with consequences for competition, industry structure and product offerings. We explore these consequences in a rich but tractable model that allows for strategic design choices. We find a polarized market structure, where some firms choose designs aiming for broad-based audiences, while others target narrow niches. Such an industry structure can arise even when all firms and consumers are ex-ante identical. We perform comparative statics and show the effect of a fall in search costs on the designs, market shares, prices, and profits of different firms. In particular, a fall in search costs, through the effect on product designs, can lead to higher industry prices and profits. In characterizing sales distributions, our analysis is related to discussions of how the Internet has led to the prevalence of niche goods and the long tail and superstar phenomena.

Number of Pages in PDF File: 29


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Date posted: October 4, 2009  

Suggested Citation

Bar-Isaac, Heski and Caruana, Guillermo and Cuñat, Vicente, Search, Design and Market Structure (September 1, 2009). NET Institute Working Paper No. 09-17. Available at SSRN: http://ssrn.com/abstract=1481333 or http://dx.doi.org/10.2139/ssrn.1481333

Contact Information

Heski Bar-Isaac (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416 978 3626 (Phone)
HOME PAGE: http://https://sites.google.com/site/heskibarisaac/home

Guillermo Caruana
Centre for Monetary and Financial Studies (CEMFI) ( email )
Casado del Alisal 5
28014 Madrid
Spain
34 91 429 0551 (Phone)
34 91 429 1056 (Fax)
Vicente Cuñat
London School of Economics & Political Science (LSE) - Financial Markets Group ( email )
Houghton Street
London WC2A 2AE
United Kingdom
HOME PAGE: http://www.vicentecunat.com
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