Discussion paper

DP15448 Search, Showrooming, and Retailer Variety

Pricing depends on the selection of consumers and the way that they search. Diamond (1971) highlights that consumers who search for prices, paradoxically, impose no discipline on prices. Instead, searching for match information does. Showrooming disciplines prices at deep stores (where consumers can learn about many goods in a category). It also leads shallow stores, where showroomers buy, to face a larger fraction of consumers who are insensitive to price. The overall effect of more showrooming can be to raise or lower prices. It depends on the kinds of consumers who showroom. Similarly, a price-only channel can have ambiguous effects.

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Citation

Bar-Isaac, H and S Shelegia (eds) (2022), “DP15448 Search, Showrooming, and Retailer Variety”, CEPR Press Discussion Paper No. 15448. https://cepr.org/publications/dp15448-2