Bar-Isaac, Heski, Caruana, Guillermo and Cuñat, Vicente
Search, design, and market structure.
American economic review, 102
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The Internet has made consumer search easier, with consequences for prices,
industry structure and the kinds of products offered. We explore these conse-
quences in a rich but tractable model that allows for strategic design choices.
A polarized market structure results, where some firms choose designs aimed
at broad-based audiences, while others target narrow niches. Such an industry
structure can arise even when all firms and consumers are ex-ante identical.
We analyze the e¤ect of reduced search costs and find results consistent with
the reported prevalence of niche goods and the long-tail and superstar phe-
nomena. In particular, the model suggests that long-tail e¤ects arise when
there is a wide range of potential designs, relative to vertical heterogeneity
||© 2012 American Economic Association
||search, Internet, long-tail, superstar, design, marketing
|Library of Congress subject classification:
||H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
|Journal of Economic Literature Classification System:
||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services; Computer Software
M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M31 - Marketing
||Research centres and groups > Managerial Economics and Strategy Group
Departments > Finance
Departments > Management
Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
||10 Nov 2011 14:23
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