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Free keywords:
strategic inattention, price discrimination, information transmission,
consumer choice, experiment
JEL:
D11 - Consumer Economics: Theory
JEL:
D42 - Monopoly
JEL:
D82 - Asymmetric and Private Information; Mechanism Design
JEL:
D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
JEL:
L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Abstract:
Rapid technological developments in online markets fundamentally change the relationship between consumers and sellers. Online platforms can now easily gather data about the consumer and his search behavior, that allow for price discrimination. Therefore the consumers’ product search becomes a strategic choice. Consumers face a trade-off: Search intensely and receive a better fit at a potentially higher price or restrict search behavior – be strategically inattentive – and receive a worse fit, but maybe a better deal. We study the resulting strategic buyer-seller interaction theoretically as well as experimentally. Our experimental results shed a critical light on the added value for consumers through the rise of online platforms.
