Targeted search and the long tail effect

This paper develops a search model to explain the long tail effect. Search targetibility or the quality of search is explicitly modeled. Consumers are searching for the right products within the right categories. Mainstream consumers are distinguished from long tail consumers in terms of the prevalence of consumer tastes in the population. We show that mainstream consumers enjoy higher utility and mainstream products are sold at lower prices. In the market equilibrium long tail consumers might be excluded. As search costs decrease or search targetibility increases, additional variety of goods catering to long tail consumers will be provided and the concentration of sales across different category of goods decreases. The effects of a decrease in search costs or an increase in search targetibility on consumer utility, prices, and profits depend on whether the type coverage increases. Decreases in search costs and increases in search targetibility have different qualitative effects.