The Power of Commitment in Group Search

55 Pages Posted: 19 Aug 2019 Last revised: 18 Apr 2022

See all articles by Xinyu Cao

Xinyu Cao

New York University (NYU) - Leonard N. Stern School of Business

Yuting Zhu

Massachusetts Institute of Technology (MIT)

Date Written: April 15, 2022

Abstract

In this paper, we build a two-member two-period model to show that when a group of people with different preferences conduct search and make a decision together, they can benefit from making a commitment on the number of products to search \emph{ex ante} when the search cost is very small or relatively large. The underlying mechanism is that, because of the preference inconsistency between group members, they tend to search fewer products and thus have lower expected utility in group search than in single-agent search, and making a commitment on the number of products to search helps mitigate the preference inconsistency problem in group search, especially when the search cost is very small or relatively large. If consumers can observe product prices before search and the firm sets product prices endogenously, the firm can benefit from letting consumers commit on the number of products to search \emph{ex ante} if consumers search as a group and their search cost is small. We also consider several extensions to show the robustness and boundary conditions of our findings.

Keywords: Search, Group Decision, Preference Inconsistency, Commitment

Suggested Citation

Cao, Xinyu and Zhu, Yuting, The Power of Commitment in Group Search (April 15, 2022). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3437993 or http://dx.doi.org/10.2139/ssrn.3437993

Xinyu Cao (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Yuting Zhu

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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