Consumer search and optimal information


Dogan M., Hu J.

RAND JOURNAL OF ECONOMICS, vol.53, no.2, pp.386-403, 2022 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 53 Issue: 2
  • Publication Date: 2022
  • Doi Number: 10.1111/1756-2171.12411
  • Journal Name: RAND JOURNAL OF ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, CAB Abstracts, EconLit, INSPEC, Public Administration Abstracts, vLex, DIALNET
  • Page Numbers: pp.386-403
  • Istanbul Technical University Affiliated: No

Abstract

This article studies an information design problem in a sequential consumer search environment. Consumers, whose valuation of firms' products is uncertain, observe a noisy signal about the valuation upon being matched with a firm. The goal is to characterize those signal structures that maximize consumer surplus. We show that the consumer-optimal signal structure can be found within the class of conditional unit-elastic demand signal distributions. A rich set of properties and comparative statics of the consumer-optimal signal distributions are also derived.