Sequential Search and Firm Prominence

28 Pages Posted: 7 Aug 2019 Last revised: 9 Apr 2021

See all articles by Jose Carrasco

Jose Carrasco

Facultad de Ingeniería y Ciencias, Universidad Adolfo Ibañez

Rodrigo Yañez

University of Wisconsin - Madison - Department of Economics

Date Written: April 8, 2021

Abstract

We explore the role of prominence in equilibrium pricing in markets where search is sequential and random. Our model key feature is that more prominent firms are more likely to be sampled first. In contrast to ordered-search models, we find that more prominent firms inherit larger but less elastic demands, and as such have incentives to post larger prices. However, they might post lower prices but still charge higher markups than less prominent competitors only if they are also sufficiently more efficient. Our results suggest that when search is sequential, the role of prominence depends on whether it modifies the order or just the chances with which firms are sampled.

Keywords: Search Theory, Prominence, Pricing

JEL Classification: D21, D43, D83

Suggested Citation

Carrasco, Jose and Yañez, Rodrigo, Sequential Search and Firm Prominence (April 8, 2021). Available at SSRN: https://ssrn.com/abstract=3431673 or http://dx.doi.org/10.2139/ssrn.3431673

Jose Carrasco (Contact Author)

Facultad de Ingeniería y Ciencias, Universidad Adolfo Ibañez ( email )

2640, Peñalolen
Santiago
Chile

HOME PAGE: http://www.tonocarrasco.com

Rodrigo Yañez

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States

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