Discussion paper
DP16440 Consumer Search and Choice Overload
We consider a multiproduct seller facing consumers who must search to learn
prices and valuations. The equilibrium features choice overload: the larger
the product line, the fewer consumers start searching. We provide conditions
under which the seller offers too much or too little variety. We then allow
the seller to position products or make recommendations, thereby introducing
the possibility of directed search, and show that the seller may find it
profitable to maintain some noise. Finally, we study the seller's incentive
to disclose product identity and extend our analysis to that of a platform
choosing which sellers to host.
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