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Advertising as a search deterrent

Advertising as a search deterrent This article examines a monopoly firm's incentive to disclose information through advertising when consumers can choose between buying immediately and searching for additional information. Because sales drop when search reveals low match values to consumers, the firm has an incentive to deter search. We show that partial information disclosure emerges as a useful tool for search deterrence when search costs are low. Informative advertising and consumer search can be viewed as complements in producing information. Although transparency policies reduce search expenditures and improve purchase decisions, whether they are socially desirable depends on the magnitude of search costs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Rand Journal of Economics Wiley

Advertising as a search deterrent

Wang, Chengsi
The Rand Journal of Economics , Volume 48 (4) – Jan 1, 2017
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References (21)

Publisher
Wiley
Copyright
© 2017 The RAND Corporation
ISSN
0741-6261
eISSN
1756-2171
DOI
10.1111/1756-2171.12209
Publisher site
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Abstract

This article examines a monopoly firm's incentive to disclose information through advertising when consumers can choose between buying immediately and searching for additional information. Because sales drop when search reveals low match values to consumers, the firm has an incentive to deter search. We show that partial information disclosure emerges as a useful tool for search deterrence when search costs are low. Informative advertising and consumer search can be viewed as complements in producing information. Although transparency policies reduce search expenditures and improve purchase decisions, whether they are socially desirable depends on the magnitude of search costs.

Journal

The Rand Journal of Economics – Wiley

Published: Jan 1, 2017

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