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Thursday, January 25, 2018 at 11:15am to 12:45pm
Sage Hall, 333
Johnson Graduate School-Management, 106 Sage Hall, Ithaca, NY 14853-6201, USA
Marcel Preuss - University of Mannheim
Consumer Search with and without Tracking
Abstract: In this paper, I develop a tractable framework with sequential consumer search to address the effect of tracking on market outcomes. Tracking search histories is informative about consumers' valuations because different consumer types have different stopping probabilities. With tracking, the unique equilibrium price path is increasing whereas without tracking, an average uniform price prevails. Welfare effects largely depend on how tracking affects consumers' search persistence. For intermediate search costs, tracking based price discrimination exacerbates the holdup problem and leads to inefficiently low search persistence. For high search costs instead, tracking prevents a market breakdown as low prices conditional on short search histories secure consumers a positive surplus from search. Tracking prevails endogenously when consumers can dynamically opt out from tracking. This holds since disclosing their search history is always individually rational for consumers, irrespective of the overall effect on consumer surplus.
Sara Ashman
607-255-3072
Marcel Preuss
University of Mannheim
Cornell Economics Community (list serve members)