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Search prominence and return costs

Author

Listed:
  • Fishman, Arthur
  • Lubensky, Dmitry
Abstract
It is widely held that sellers prefer to appear early in a consumer’s search, but evidence suggests this need not be the case. We develop a model which incorporates costly search and costly return and demonstrate that appearing later may be better. When return is free, prominence is desirable by standard logic, however costly return induces a tradeoff – it benefits an earlier seller by reducing the initial search but also benefits a later seller by preventing return conditional on search. We show that for small search costs later is better whenever high outcomes have a low likelihood, or whenever two independent match value draws are likely to be near one another. Later can still be better if sellers compete in prices prior to search. Finally, with many sellers the optimal position may be first, last, or in between but earlier positions are favored as the number of sellers grows.

Suggested Citation

  • Fishman, Arthur & Lubensky, Dmitry, 2018. "Search prominence and return costs," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 136-161.
    • Handle: RePEc:eee:indorg:v:58:y:2018:i:c:p:136-161
    DOI: 10.1016/j.ijindorg.2017.10.009
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.
    2. Chen, Yanbin & Li, Sanxi & Lin, Kai & Yu, Jun, 2021. "Consumer search with blind buying," Games and Economic Behavior, Elsevier, vol. 126(C), pages 402-427.
    3. José L Moraga-González & Zsolt Sándor & Matthijs R Wildenbeest, 2021. "Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence," The Economic Journal, Royal Economic Society, vol. 131(635), pages 1308-1330.
    4. Sanxi Li & Jun Yu & Mingsheng Zhang, 2024. "Search Prominence with Costly Product Returns," Papers 2410.06791, arXiv.org.
    5. Li, Sanxi & Sun, Hailin & Yu, Jun, 2023. "Competitive targeted online advertising," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    6. Harris, Mark N. & Novarese, Marco & Wilson, Chris M., 2022. "Being in the right place: A natural field experiment on the causes of position effects in individual choice," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 24-40.

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    More about this item

    Keywords

    Search position; Consumer search; Search with costly recall; Search prominence;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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