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Search, design, and market structure

Bar-Isaac, Heski and Caruana, Guillermo and Cunat, Vicente (2012) Search, design, and market structure. American Economic Review, 102 (2). pp. 1140-1160. ISSN 0002-8282

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Identification Number: 10.1257/aer.102.2.1140

Abstract

The Internet has made consumer search easier, with consequences for prices, industry structure, and the kinds of products offered. We provide an industry model with strategic design choices that explores these issues. A polarized market structure results: some firms choose designs aimed at broad-based audiences, while others target narrow niches. We analyze the effect of reduced search costs, finding results consistent with the reported prevalence of niche goods and long-tail and superstar phenomena. In particular, the model suggests that long-tail effects arise when there is a wide range of potential designs, relative to vertical heterogeneity among firms.

Item Type: Article
Official URL: http://www.aeaweb.org/aer/index.php
Additional Information: © 2012 American Economic Association
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HF Commerce
Sets: Departments > Finance
Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 18 Apr 2013 15:42
Last Modified: 30 May 2014 15:23
URI: http://eprints.lse.ac.uk/id/eprint/37827

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