Ordered Search with Boundedly Rational Consumers

Mauro Papi*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

The literature on ordered search has assumed consumers to search optimally. In contrast, I investigate a price-competition model in which consumers are boundedly rational and firms use persuasive advertising to influence the consumers' aspiration price, i.e., the price regarded as 'satisfactory'. I consider various variants of the model capturing different consumers' second-best strategies if they do not find any satisfactory price. I derive a number of results including (i) predictions about the correlation between firm prominence and important market indicators, such as profits and conversion rates, that can help explain empirical evidence, (ii) extensions of the basic model, such as an analysis of the relationship between the consumer satisfaction rate and firms profits, and (iii) policy implications of the model.

Original languageEnglish
Title of host publicationEC 2020
Subtitle of host publicationProceedings of the 21st ACM Conference on Economics and Computation
PublisherAssociation for Computing Machinery, Inc
Pages507-508
Number of pages2
ISBN (Electronic)9781450379755
DOIs
Publication statusPublished - 13 Jul 2020
Event21st ACM Conference on Economics and Computation, EC 2020 - Virtual, Online, Hungary
Duration: 13 Jul 202017 Jul 2020

Publication series

NameEC 2020 - Proceedings of the 21st ACM Conference on Economics and Computation

Conference

Conference21st ACM Conference on Economics and Computation, EC 2020
CountryHungary
CityVirtual, Online
Period13/07/2017/07/20

Keywords

  • aspiration price
  • bounded rationality
  • ordered search.
  • price competition
  • satisficing

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