Insufficient Entry and Consumer Search
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Toshiki Matsuoka
Abstract
This study considers a search market with an outside option and shows that entry may be insufficient. When a firm enters the search market, the price decreases, and consumers can search for more products, which increases the market demand and improves social welfare. However, firms do not internalize the effect, and insufficient entry can occur. Additionally, insufficient entry is likely to occur in a search market with low search costs and/or an attractive outside option, as these factors increase the socially optimal number of firms but decrease the firms’ profits.
Acknowledgments
I am grateful to the editor and two anonymous referees for their comments, which greatly improved this paper. I am also grateful to Tomomichi Mizuno, Takashi Shimizu, and Takashi Yanagawa for their helpful and valuable comments.
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Articles in the same Issue
- Frontmatter
- Research Articles
- Duty to Read vs Duty to Disclose Fine Print. Does the Market Structure Matter?
- Cobb-Douglas Preferences and Pollution in a Bilateral Oligopoly Market
- Epsilon-Efficiency in a Dynamic Partnership with Adverse Selection and Moral Hazard
- Management Turnover, Strategic Ambiguity and Supply Incentives
- Uninformed Bidding in Sequential Auctions
- Arrowian Social Equilibrium: Indecisiveness, Influence and Rational Social Choices under Majority Rule
- Family Ties and Corruption
- Social Efficiency of Entry in a Vertical Structure with Third Degree Price Discrimination
- Insufficient Entry and Consumer Search
- Quality Competition and Market-Share Leadership in Network Industries
- The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV
- Redistributive Unemployment Benefit and Taxation
- Constrained Persuasion with Private Information
- A Dynamic Graph Model of Strategy Learning for Predicting Human Behavior in Repeated Games
- Relative Income Concerns, Dismissal, and the Use of Pay-for-Performance
- Delegation in Vertical Relationships: The Role of Reciprocity
- Step by Step Innovation without Mutually Exclusive Patenting: Implications for the Inverted U
- Data and Competitive Markets: Some Notes on Competition, Concentration and Welfare
- Notes
- Optimality of a Linear Decision Rule in Discrete Time AK Model
- Equilibrium Pricing under Concave Advertising Costs
Articles in the same Issue
- Frontmatter
- Research Articles
- Duty to Read vs Duty to Disclose Fine Print. Does the Market Structure Matter?
- Cobb-Douglas Preferences and Pollution in a Bilateral Oligopoly Market
- Epsilon-Efficiency in a Dynamic Partnership with Adverse Selection and Moral Hazard
- Management Turnover, Strategic Ambiguity and Supply Incentives
- Uninformed Bidding in Sequential Auctions
- Arrowian Social Equilibrium: Indecisiveness, Influence and Rational Social Choices under Majority Rule
- Family Ties and Corruption
- Social Efficiency of Entry in a Vertical Structure with Third Degree Price Discrimination
- Insufficient Entry and Consumer Search
- Quality Competition and Market-Share Leadership in Network Industries
- The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV
- Redistributive Unemployment Benefit and Taxation
- Constrained Persuasion with Private Information
- A Dynamic Graph Model of Strategy Learning for Predicting Human Behavior in Repeated Games
- Relative Income Concerns, Dismissal, and the Use of Pay-for-Performance
- Delegation in Vertical Relationships: The Role of Reciprocity
- Step by Step Innovation without Mutually Exclusive Patenting: Implications for the Inverted U
- Data and Competitive Markets: Some Notes on Competition, Concentration and Welfare
- Notes
- Optimality of a Linear Decision Rule in Discrete Time AK Model
- Equilibrium Pricing under Concave Advertising Costs
