Consumer Search and Filtering on Online Retail Platforms

50 Pages Posted: 15 Sep 2016 Last revised: 26 Mar 2020

See all articles by Baojun Jiang

Baojun Jiang

Washington University in Saint Louis - John M. Olin Business School

Tianxin Zou

University of Florida - Warrington College of Business Administration

Date Written: March 24, 2020

Abstract

This article examines how the consumer’s search cost and filtering on a retail platform affect the platform, the third-party sellers, and the consumers. We show that, given the platform’s percentage referral fee, a lower search cost can either increase or lower the platform’s profit. By contrast, if the platform optimally adjusts its referral fee, a lower search cost will increase the platform’s profit. As the consumer’s search cost decreases, if the platform’s demand elasticity increases significantly, the platform should reduce its fee, potentially resulting in an all-win outcome for the platform, the sellers and the consumer; otherwise, a lower search cost will increase the platform’s optimal fee percentage, potentially leading to higher equilibrium price. Furthermore, we find that the availability of filtering on the platform will in expectation make consumers search fewer products but buy products with higher match values, and can either increase or decrease the equilibrium retail price. When filtering reveals only a small amount of the products’ match-value variations, it will benefit the platform, the sellers, and the consumers.

Keywords: Search, Retail Platform, Pricing, E-Commerce, Channel, Filtering

JEL Classification: D83, L81, L11

Suggested Citation

Jiang, Baojun and Zou, Tianxin, Consumer Search and Filtering on Online Retail Platforms (March 24, 2020). Available at SSRN: https://ssrn.com/abstract=2839102 or http://dx.doi.org/10.2139/ssrn.2839102

Baojun Jiang (Contact Author)

Washington University in Saint Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States
3149353315 (Phone)

HOME PAGE: http://apps.olin.wustl.edu/faculty/Jiang/

Tianxin Zou

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

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