Consumer Search and Optimal Information

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Pages (from-to)386-403
Number of pages18
JournalThe RAND Journal of Economics
Volume53
Issue number2
DOIs
Publication statusPublished - 1 Jun 2022

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