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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:
Online platforms provide search tools that help consumers to get better-fitting product offers. But this technology makes consumer search behavior also easily traceable and allows for real-time price discrimination. 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 show that it is the sellers and not the buyers who profit from these search tools.
