Competitive Information Disclosure in Search Markets

Buyers often search across sellers to learn which product best fits their needs. We study how sellers manage these search incentives through their disclosure strategies (e.g., product trials, reviews, and recommendations) and ask how competition affects information provision. If sellers can observe...

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Bibliographic Details
Published in:The Journal of political economy 2018-10, Vol.126 (5), p.1965-2010
Main Authors: Board, Simon, Lu, Jay
Format: Article
Language:English
Subjects:
Buyers
Coordination
Disclosure
Economic theory
Equilibrium
Incentives
Information sharing
Information sources
Markets
Monopolies
Political economy
Product reviews
Search strategies
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Summary:Buyers often search across sellers to learn which product best fits their needs. We study how sellers manage these search incentives through their disclosure strategies (e.g., product trials, reviews, and recommendations) and ask how competition affects information provision. If sellers can observe the beliefs of buyers or can coordinate their strategies, then there is an equilibrium in which sellers provide the “monopoly level” of information. In contrast, if buyers’ beliefs are private, then there is an equilibrium in which sellers provide full information as search costs vanish. Anonymity and coordination thus play important roles in understanding how advice markets work.
ISSN:0022-3808
1537-534X
DOI:10.1086/699211