Metasearch and market concentration

Foucart, Renaud (2020) Metasearch and market concentration. International Journal of Industrial Organization, 70: 102614. ISSN 0167-7187

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Abstract

Competing intermediaries search on behalf of consumers among a large number of horizontally differentiated sellers. Consumers either pick the best deal offered by an intermediary, or compare the intermediaries. A higher number of intermediaries has the direct effect of decreasing their search effort. Hence, if an exogenous share of consumers do not compare, more competition hurts them. More competition however also increases the incentives for consumers to compare. A higher share of informed consumers in turn increases the search effort of intermediaries. If consumers are ex-ante identical and rationally choose whether to become informed, the total effect of a higher number of intermediaries is to make each of them (weakly) choosier. Moreover, it always decreases the price offered by sellers. Allowing intermediaries to bias their advice by making sponsored links prominent has a similar effect of making all consumers better off in expectation.