Persuading Perceval; Information Provision in a Sequential Search Setting

This paper modifies the classic Weitzman search problem by granting the items (boxes) to be searched agency. In this zero-sum game, each box commits to a signal structure in order to maximize the chance that it is selected by the searcher at the completion of his search. There is a common, symmetric binary prior on the distribution of prizes within the boxes. If there are no search frictions, then the problem reduces to the one examined in Hulko and Whitmeyer (2017). On the other hand, with search frictions, if the expected value of the prize is sufficiently high, there is a symmetric equilibrium in pure strategies; but if it is too low, then there is no such pure strategy equilibrium. Remarkably, it is always beneficial to the searcher to have a slight search cost. This is in sharp contrast to the famous Diamond paradox. Instead, in this model, a small search cost leads to the Perfect Competition level of information provision.