American Economic Review Vol. 108 No. 7 2018

Consumer Price Search and Platform Design in Internet Commerce

Michael Dinerstein¹; Liran Einav²; Jonathan Levin³; Neel Sundaresan⁴

¹ Kenneth C. Griffin Department of Economics, University of Chicago, 1126 E 59th Street, Chicago, IL 60637, and NBER (email: ) · ² Department of Economics, Stanford University, 579 Serra Mall, Stanford, CA 94305, and NBER (email: ) · ³ Department of Economics and Graduate School of Business, Stanford University, 579 Serra Mall, Stanford, CA 94305, and NBER (email: ) · ⁴ Microsoft, 1 Microsoft Way, Redmond, WA 98052 (email: )

Abstract

The platform design, the process that helps potential buyers on the internet navigate toward products they may purchase, plays a critical role in reducing search frictions and determining market outcomes. We study a key trade-off associated with two important roles of efficient platform design: guiding consumers to their most desired product while also strengthening seller incentives to lower prices. We use simple theory to illustrate this, and then combine detailed browsing data from eBay and an equilibrium model of consumer search and price competition to quantitatively assess this trade-off in the particular context of a change in eBay's marketplace design.

DOI

10.1257/aer.20171218

Volume

108

Issue

7

Pages

1820-1859

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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