Consumer Price Search and Platform Design in Internet Commerce
AbstractThe platform design, the process that helps potential buyers on the internet navigate toward products they may purchase, plays a critical role in reducing search frictions and determining market outcomes. We study a key trade-off associated with two important roles of efficient platform design: guiding consumers to their most desired product while also strengthening seller incentives to lower prices. We use simple theory to illustrate this, and then combine detailed browsing data from eBay and an equilibrium model of consumer search and price competition to quantitatively assess this trade-off in the particular context of a change in eBay's marketplace design.
CitationDinerstein, Michael, Liran Einav, Jonathan Levin, and Neel Sundaresan. 2018. "Consumer Price Search and Platform Design in Internet Commerce." American Economic Review, 108 (7): 1820-59. DOI: 10.1257/aer.20171218
- D12 Consumer Economics: Empirical Analysis
- D44 Auctions
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L81 Retail and Wholesale Trade; e-Commerce
- L86 Information and Internet Services; Computer Software