Conditioning Prices on Search Behaviour
نویسندگان
چکیده
We consider a market in which rms can partially observe each consumers search behavior in the market. In our main model, a rm knows whether a consumer is visiting it for the rst time or whether she is returning after a previous visit. Firms have an incentive to o¤er a lower price on a rst visit than a return visit, so that new consumers are o¤ered a buy-nowdiscount. The ability to o¤er such discounts acts to raise all prices in the market. If rms cannot commit to their buy-later price, in many cases rms make explodingo¤ers, and consumers never return to a previously sampled rm. Likewise, if rms must charge the same price to all consumers, regardless of search history, we show that they sometimes have the incentive to make exploding o¤ers. We also consider other ways in which rms could use information about search behaviour to determine their prices.
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