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Optimal product placement

Hsu, Chia-Ling, Matta, Rafael, Popov, Sergey V. and Sogo, Takeharu 2017. Optimal product placement. Review of Industrial Organization 51 (1) , pp. 127-145. 10.1007/s11151-017-9575-y

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Abstract

We model a market, such as an online software market, in which an intermediary connects sellers and buyers by displaying sellers’ products. With two vertically-differentiated products, an intermediary can place either: (1) one product, not necessarily the better one, on the first page, and the other hidden on the second page; or (2) both products on the first page. We show that it can be optimal for the intermediary to obfuscate a product—possibly the better one—since this weakens price competition and allows the sellers to extract a greater surplus from buyers; however, it is not socially optimal. The choice of which one to obfuscate depends on the distribution of search costs.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
Publisher: Springer Verlag
ISSN: 0889-938X
Date of First Compliant Deposit: 3 August 2017
Date of Acceptance: 22 March 2017
Last Modified: 11 Oct 2017 11:01
URI: http://orca.cardiff.ac.uk/id/eprint/103173

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