Guiding Consumers through Lemons and Peaches: An Analysis of the Effects of Search Design Activities

50 Pages Posted: 18 May 2018 Last revised: 14 Jan 2020

See all articles by Pedro Gardete

Pedro Gardete

Nova School of Business and Economics

Megan Hunter

Boston College - Carroll School of Management

Date Written: January 10, 2020

Abstract

The advent of the Internet age has led to questions about the impact of obfuscation and information provision activities by sellers. We estimate the welfare effects of search design activities by an online used car seller, through a dynamic model of search over differentiated offerings. We find that different emphases on product characteristics have a modest impact on consumer welfare (-0.4% to +2.5%) but a relatively high impact on the seller’s (-1.9% to +11.3%). Incentives for information provision are found to be largely aligned between supply and demand. Finally, we find no evidence of consumer myopia in learning.

Keywords: consumer search, information design, correlated attributes, knowledge gradient

JEL Classification: D12, D82, D83

Suggested Citation

Gardete, Pedro and Hunter, Megan, Guiding Consumers through Lemons and Peaches: An Analysis of the Effects of Search Design Activities (January 10, 2020). Stanford University Graduate School of Business Research Paper No. 3669, Available at SSRN: https://ssrn.com/abstract=3180811 or http://dx.doi.org/10.2139/ssrn.3180811

Pedro Gardete (Contact Author)

Nova School of Business and Economics ( email )

Rua da Holanda, 1
Carcavelos, Lisbon 2775-405
Portugal

HOME PAGE: http://pedrogardete.com

Megan Hunter

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
127
Abstract Views
908
rank
243,128
PlumX Metrics