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.