Discussion paper
DP17907 Coasian Dynamics in Sequential Search
Consumer-tracking technology offers new tools for price discrimination in digital markets. We examine the impact of sellers using this technology to adjust prices according to a buyer’s prior search length in a competitive search market where buyers differ in their patience. We find a “Coasian equilibrium” wherein sellers reduce prices for buyers with longer search lengths which in turn requires them to reduce prices for buyers with shorter search lengths. There is a Coasian equilibrium that not only yields higher welfare for every buyer than all uniform-pricing equilibria, but is also the unique symmetric equilibrium when some mass of buyers are arbitrarily patient.
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