Search Prominence and Recall Costs

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