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Search Design and Broad Matching

Eliaz, K; Spiegler, R; (2016) Search Design and Broad Matching. American Economic Review , 106 (3) pp. 563-586. 10.1257/aer.20150076. Green open access

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Abstract

We study decentralized mechanisms for allocating firms into search pools. The pools are created in response to noisy preference signals provided by consumers, who then browse the pools via costly random sequential search. Surplus-maximizing search pools are implementable in symmetric Nash equilibrium. Full extraction of the maximal surplus is implementable if and only if the distribution of consumer types satisfies a set of simple inequalities, which involve the relative fractions of consumers who like different products and the Bhattacharyya coefficient of similarity between their conditional signal distributions. The optimal mechanism can be simulated by a keyword auction with broad matching. (JEL C78, D44, D82)

Type: Article
Title: Search Design and Broad Matching
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/aer.20150076
Publisher version: http://doi.org/10.1257/aer.20150076
Language: English
Additional information: Copyright © 2016 AEA. All rights reserved. Copyrights for components of this work owned by others than AEA must be honored. Abstracting with credit is permitted.
Keywords: Social Sciences, Economics, Business & Economics, 2-sided Markets, Consumer Search, Competition, Internet
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1479566
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