Consumer Price Search and Platform Design in Internet Commerce
Michael Dinerstein, Liran Einav, Jonathan Levin, Neel Sundaresan
American Economic Review · 2018 · Volume 108 · Issue 7
Abstract
The platform design, the process that helps potential buyers on the internet navigate toward products they may purchase, plays a critical role in reducing search frictions and determining market outcomes. We study a key trade-off associated with two important roles of efficient platform design: guiding consumers to their most desired product while also strengthening seller incentives to lower prices. We use simple theory to illustrate this, and then combine detailed browsing data from eBay and an equilibrium model of consumer search and price competition to quantitatively assess this trade-off in the particular context of a change in eBay's marketplace design.
Keywords
Consumer Economics: Empirical Analysis, Auctions, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Retail and Wholesale Trade, e-Commerce, Information and Internet Services, Computer Software
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