TY - JOUR
T1 - Attraction versus Persuasion
T2 - Information Provision in Search Markets
AU - Au, Pak Hung
AU - Whitmeyer, Mark
N1 - Funding Information:
of M. Whitmeyer’s dissertation at the University of Texas at Austin. P. H. Au gratefully acknowledges the financial support of the Lee Heng Fellowship. M. Whitmeyer thanks the University of Bonn, where he was supported under the Deutsche Forschungsgemeinschaft project 390685813. This paper was edited by Emir Kamenica.
Publisher Copyright:
© 2022 The University of Chicago. All rights reserved. Published by The University of Chicago Press.
PY - 2023/1
Y1 - 2023/1
N2 - We consider a model of oligopolistic competition in a market with search frictions, in which competing firms with products of unknown quality advertise how much information a consumer’s visit will glean. In the unique symmetric equilibrium of this game, the countervailing incentives of attraction and persuasion yield a payoff function for each firm that is linear in the firm’s realized effective value. If the expected quality of the products is sufficiently high (or competition is sufficiently fierce), this corresponds to full information: firms provide the first-best level of information. If not, this corresponds to information dispersion: firms randomize over signals.
AB - We consider a model of oligopolistic competition in a market with search frictions, in which competing firms with products of unknown quality advertise how much information a consumer’s visit will glean. In the unique symmetric equilibrium of this game, the countervailing incentives of attraction and persuasion yield a payoff function for each firm that is linear in the firm’s realized effective value. If the expected quality of the products is sufficiently high (or competition is sufficiently fierce), this corresponds to full information: firms provide the first-best level of information. If not, this corresponds to information dispersion: firms randomize over signals.
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U2 - 10.1086/720984
DO - 10.1086/720984
M3 - Article
AN - SCOPUS:85146500588
SN - 0022-3808
VL - 131
SP - 202
EP - 245
JO - Journal of Political Economy
JF - Journal of Political Economy
IS - 1
ER -