Search Prominence and Recall Costs

15 Pages Posted: 1 Nov 2016

See all articles by Arthur Fishman

Arthur Fishman

Bar-Ilan University - Department of Economics

Dmitry Lubensky

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Date Written: October 15, 2016

Abstract

Although it is widely held that sellers prefer to appear early in a consumer’s search, some evidence from online markets suggests this need not be the case. We develop a model which incorporates costly search and costly recall and demonstrate that when both frictions are small, appearing later may be better. When recall is free, prominence is desirable by standard logic, however costly recall induces a tradeoff – it benefits the prominent seller by reducing the initial search but also benefits the later seller by preventing return conditional on search. We show that later can be better whenever values are sufficiently correlated, or whenever values are drawn independently from a distribution in which two draws are likely to be near one another.

Keywords: Consumer Search, Search Prominence, Recall Costs

Suggested Citation

Fishman, Arthur and Lubensky, Dmitry, Search Prominence and Recall Costs (October 15, 2016). Kelley School of Business Research Paper No. 16-78. Available at SSRN: https://ssrn.com/abstract=2862086 or http://dx.doi.org/10.2139/ssrn.2862086

Arthur Fishman

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
972-3-531-8366 (Phone)
972 3 535 3180 (Fax)

Dmitry Lubensky (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

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