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Prominence and consumer search

Armstrong, M.; Vickers, J.; Zhou, J.; (2007) Prominence and consumer search. (Discussion Papers in Economics 07-04). Department of Economics, University College London: London, UK. Green open access

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Abstract

This paper examines the implications of “prominence” in search markets. We model prominence by supposing that the prominent firm will be sampled first by all consumers. If there are no systematic quality differences among firms, we find that the prominent firm will charge a lower price than its non-prominent rivals. The impact of making a firm prominent is that it will typically lead to higher industry profit but lower consumer surplus and welfare. The model is extended by introducing heterogeneous product qualities, in which case the firm with the highest-quality product has the greatest incentive to become prominent, and making it prominent will boost industry profit, consumer surplus and welfare.

Type: Working / discussion paper
Title: Prominence and consumer search
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.ucl.ac.uk/silva/economics/research/pape...
Language: English
Keywords: JEL classification: D43, D83, L13. Consumer search, marketing, prominent display, product differentiation
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/7649
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