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Cover of: Electronic Platforms in a Consumer Search Model
Hui Song

Electronic Platforms in a Consumer Search Model

Section: Articles
Volume 170 (2014) / Issue 4, pp. 704-730 (27)
Published 09.07.2018
DOI 10.1628/093245614X14095645408956
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  • 10.1628/093245614X14095645408956
Summary
We use a search model to study how the outside market affects the inside market. Consumers look for price and match information through either a costly sequential search or a monopoly platform, which chooses the number of inside firms. Our analysis finds an equilibrium where each consumer visits the platform first. The number of firms chosen by the platform is inversely related to search cost, due to the presence of two opposing effects: the competition-intensifying effect and the market-expansion effect. The same pattern arises when several competing stores in the platform choose the number of firms.