Online Shopping Intermediaries: The Strategic Design of Search Environments
Management Science, Forthcoming
34 Pages Posted: 27 Mar 2015 Last revised: 25 Jun 2016
Date Written: February 2, 2015
An online shopping intermediary is an internet platform on which consumers and third-party sellers transact. Shopping intermediaries provide a search environment (e.g., search aids) to lower consumers’ search costs incurred when finding and evaluating sellers’ products. We study strategic incentives of an intermediary in the design of its search environment as a means to ease search costs. An important aspect of our analysis is that consumers optimally decide how many sellers to evaluate and how deeply (e.g., number of attributes) to evaluate each of them. We find that the equilibrium search environment embeds sufficiently high search costs to prevent consumers from evaluating too many sellers, but not too high to cause them to evaluate sellers’ products at partial depth.
Keywords: Search Platforms, Search Environment, Partial Search
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