Consumer Search with Limited Product Evaluation

Forthcoming in the Journal of Economics & Management Strategy

40 Pages Posted: 10 Sep 2015

See all articles by Lin Liu

Lin Liu

University of Central Florida

Anthony J. Dukes

University of Southern California - Marshall School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 31, 2015

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 multi-product firms and find similar effects due to changes in within-firm search costs.

Keywords: Consumer Search, Simultaneous Search, Limited Evaluation

JEL Classification: D43, D83, L13

Suggested Citation

Liu, Lin and Dukes, Anthony J., Consumer Search with Limited Product Evaluation (August 31, 2015). Forthcoming in the Journal of Economics & Management Strategy. Available at SSRN: https://ssrn.com/abstract=2658617

Lin Liu

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

Anthony J. Dukes (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States
213-740-3846 (Phone)

HOME PAGE: http://sites.usc.edu/anthonydukes/

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