【公开学术报告】Prominent Retailer and Price Search

Date & Time: 9:30-11:00am, Thur. 10^th, October 2019

Venue: Room 2101, Tongji Building A

Language: English

Speaker：Dr. Ruitong WANG (University of Minnesota, US)

ABSTRACT

In online retail market, search traffic tends to be heavily concentrated on a “prominent” retailer, such as Amazon in the U.S. and Alibaba in China. This research asks the following questions in an intra-brand setting: how should a prominent retailer leverage its search traffic advantage in pricing decisions? How does search traffic concentration affect price competition, consumer welfare, and the retailer’s profit? We study the above questions through a sequential price search model. The consumers with heterogeneous search costs conduct price search across competing retailers within their limited search consideration sets. In our model, the prominent retailer dominates search traffic in two dimensions: (1) it has the highest first search market share and (2) it appears in all consumers’ search consideration sets. We find that the prominent retailer charge a higher average price than its competitors if its first search share is sufficiently high. Otherwise, its average price is relatively low despite its highest first search level. Furthermore, a higher level of traffic concentration can intensify price competition and lower average prices for all retailers. This suggests that consumers can become better off if search traffic is more concentrated. Lastly, there might exist a “curse of prominence” such that more traffic can reduce a retailer’s profit.

Keywords: Price Search, Search Order, Search Cost Heterogeneity, Search Concentration, Intra-brand Competition, Competitive Strategy, Curse of Prominence