Online Appendix to ``If Many Seek, Ye Shall Find: Search Externalities and New Goods''

Proof. Consumer i’s decision problem is essentially one of sequentially sampling from a stationary distribution of independently and identically distributed random variables. The value of each sampled contract is the random variable [u(σ|vi) ∨ 0]. (Each sample’s value is bounded below by zero since a consumer may opt out of the market.) The distribution of this value is derived from the distribution of σ, which the consumer believes to be ψ̃ ∈ ∆(Σ). Since prices are non-negative, the expectation of [u(σ|vi) ∨ 0] exists. By DeGroot (1970, Sections 13.5 and 13.9), the optimal strategy for the consumer is the above cutoff rule. John F. Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge MA 02138. E-mail: [email protected]. John F. Kennedy School of Government, Harvard University, 79 JFK Street. E-mail: [email protected]. The notation in (A.1) is self-explanatory. Here, “σ” is random. Its distribution is ψ̃.