Optimal Product Placement

Chia-Ling Hsu; Rafael Matta; Sergey V. Popov; Takeharu Sogo

doi:10.1007/s11151-017-9575-y

Optimal Product Placement

Chia-Ling Hsu, Rafael Matta, Sergey V. Popov, Takeharu Sogo

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

254 Downloads (Pure)

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.

Original language	English
Number of pages	19
Journal	Review of Industrial Organization
Early online date	22 Mar 2017
DOIs	https://doi.org/10.1007/s11151-017-9575-y
Publication status	Early online date - 22 Mar 2017

Keywords

Imperfect monopolistic competition
Internet trade intermediation
Menu choice
Vertical differentiation
Search costs

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10.1007/s11151-017-9575-yLicence: CC BY

OPTIMAL PRODUCT PLACEMENT
© The Author(s) 2017 This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Final published version, 502 KBLicence: CC BY

2 Citations
1 Working paper

Optimal Front Page Advertising
Hsu, C.-L., da Matta, R. & Popov, S. V., 2013, 20 p.
Research output: Working paper

Cite this

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title = "Optimal Product Placement",

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.",

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author = "Chia-Ling Hsu and Rafael Matta and Popov, {Sergey V.} and Takeharu Sogo",

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doi = "10.1007/s11151-017-9575-y",

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journal = "Review of Industrial Organization",

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AU - Hsu, Chia-Ling

AU - Matta, Rafael

AU - Popov, Sergey V.

AU - Sogo, Takeharu

PY - 2017/3/22

Y1 - 2017/3/22

N2 - 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.

AB - 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.

KW - Imperfect monopolistic competition

KW - Internet trade intermediation

KW - Menu choice

KW - Vertical differentiation

KW - Search costs

U2 - 10.1007/s11151-017-9575-y

DO - 10.1007/s11151-017-9575-y

M3 - Article

SN - 0889-938X

JO - Review of Industrial Organization

JF - Review of Industrial Organization

ER -

Optimal Product Placement

Abstract

Keywords

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Research output

Optimal Front Page Advertising

Cite this