Competition for being visited first and ordered search deterrence

TL;DR

This paper investigates how observable pricing policies and consumer choice influence search behavior and price discrimination, concluding that no seller engages in price discrimination when policies are observable and consumers can choose their initial seller.

Contribution

It introduces a model where sellers commit to observable prices and consumers select initial sellers, demonstrating that this setup prevents equilibrium price discrimination.

Findings

No seller engages in price discrimination in equilibrium.

Observable pricing policies influence consumer search strategies.

Consumer choice of initial seller impacts pricing dynamics.

Abstract

When customers must visit a seller to learn the valuation of its product, sellers potentially benefit from charging a lower price on the first visit and a higher price when a buyer returns. Armstrong and Zhou (2016) show that such price discrimination can arise in equilibrium when buyers learn a seller's pricing policy only upon visiting. We depart from this assumption by supposing that sellers commit to observable pricing policies that guide consumer search and buyers can choose whom to visit first. We show that no seller engages in price discrimination in equilibrium.