DP15448 Search, Showrooming, and Retailer Variety
|Author(s):||Heski Bar-Isaac, Sandro Shelegia|
|Publication Date:||November 2020|
|Keyword(s):||consumer search, Pricing, Retailer Variety, Showrooming|
|JEL(s):||D83, L11, L14|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=15448|
In a model of consumer search, we trace through effects of changes in retail variety. Some consumers visit stores that offer many products that are imperfect substitutes, learn which product they like most, and then buy it elsewhere. These showroomers put upward pressure on prices elsewhere because they populate the market with consumers who know their preferences, in the style of the Diamond paradox (Diamond (1971)). Changes in retail variety affect search behaviour and all market outcomes. One change that we examine is the introduction of a shopping venue where prices are readily available but product information is not.