Targeted Search and the Long Tail E¤ect

This paper develops a new search model to explain the long tail e¤ect. Search targetibility or the quality of search is explicitly modeled. Consumers are searching for right products within 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 di¤erent category of goods decreases. The e¤ects of a decrease in search costs or an increase in search targetibility on consumer utility, prices, and pro…ts depend on whether the type coverage increases. Decreases in search costs and increases in search targetibility have di¤erent qualitative e¤ects.