Advertising as a search deterrent. (13th November 2017)

• Record Type: Journal Article
• Authors: Wang, Chengsi
• Is Part Of: Rand journal of economics. Volume 48:Number 4(2017:Winter)
• Page Start: 949
• Page End: 971
• Publication Date: 2017-11-13
• Subjects: Industrial organization (Economic theory) -- Periodicals; Microeconomics -- Periodicals; Services publics -- Périodiques; Économie industrielle -- Périodiques; Microéconomie -- Périodiques; 338.6
• DOI: 10.1111/1756-2171.12209
• Languages: English
• ISSNs: 0741-6261

Abstract

Abstract: This article examines a monopoly firm's incentive to disclose information through advertising when consumers can choose between buying immediately and searching for additional information. Because sales drop when search reveals low match values to consumers, the firm has an incentive to deter search. We show that partial information disclosure emerges as a useful tool for search deterrence when search costs are low. Informative advertising and consumer search can be viewed as complements in producing information. Although transparency policies reduce search expenditures and improve purchase decisions, whether they are socially desirable depends on the magnitude of search costs.