Paying for Prominence

28 Pages Posted: 25 Oct 2011

See all articles by Mark Armstrong

Mark Armstrong

University College London - Department of Economics

Jidong Zhou

University College London - Department of Economics

Date Written: November 2011

Abstract

We investigate how firms can become ‘prominent’ and thereby influence the order in which consumers consider options. First, firms can affect sales efforts by means of commission payments, in which case the salesman steers consumers towards expensive products. Second, sellers can advertise prices on a price comparison website, so that consumers investigate the suitability of products in order of increasing price. Here, prices are lower when search costs are higher. Finally, consumers might first consider their existing supplier for subsequent purchases, which suggests a relatively benign rationale for the prevalence of cross‐selling in markets such as retail banking.

Suggested Citation

Armstrong, Mark and Zhou, Jidong, Paying for Prominence (November 2011). The Economic Journal, Vol. 121, Issue 556, pp. F368-F395, 2011. Available at SSRN: https://ssrn.com/abstract=1948946 or http://dx.doi.org/10.1111/j.1468-0297.2011.02469.x

Mark Armstrong

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Jidong Zhou

University College London - Department of Economics ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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