American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
If Many Seek, Ye Shall Find: Search Externalities and New Goods
American Economic Journal: Microeconomics
vol. 9,
no. 4, November 2017
(pp. 42–73)
Abstract
Consumer search serves productive roles in an economy with multiple goods. In equilibrium, search promotes the sorting of consumers among producers, thereby enabling the market for new goods, and potentially increasing welfare and profits above the benchmark case (an economy with a single good, hence, no search). When competitors are few, additional direct competitors may benefit a firm, as more sellers may encourage more consumers to search. In return, consumer search entices producers of new goods to enter. Neither of these externalities, nor the coordination problems faced by consumers and producers, is appropriately recognized in the literature.Citation
Kotowski, Maciej H., and Richard J. Zeckhauser. 2017. "If Many Seek, Ye Shall Find: Search Externalities and New Goods." American Economic Journal: Microeconomics, 9 (4): 42–73. DOI: 10.1257/mic.20140182Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D62 Externalities
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G22 Insurance; Insurance Companies; Actuarial Studies
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