If Many Seek, Ye Shall Find: Search Externalities and New Goods†

If Many Seek, Ye Shall Find: Search Externalities and New Goods† AbstractConsumer 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. (JEL D11, D43, D62, D82, D83, G22) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

If Many Seek, Ye Shall Find: Search Externalities and New Goods†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
1945-7685
D.O.I.
10.1257/mic.20140182
Publisher site
See Article on Publisher Site

Abstract

AbstractConsumer 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. (JEL D11, D43, D62, D82, D83, G22)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2017

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