Why do intermediaries divert search?
By: Andrei Hagiu, Bruno Jullien
Contributors: Jullien, Bruno; Harvard Business School
Edition: 2nd rev.
Series: Working paper / Harvard Business School -- 08-010; Working paper (Harvard Business School) -- 08-010.
Publisher: Division of Research, Harvard Business School
Published: 2007
Place of publication: [Boston]
Number of pages: 35
Description: We analyze the incentives to divert search for an information intermediary who enables buyers (consumers) to search affiliated sellers (stores). We identify two original motives for diverting search (i.e. inducing consumers to search more than they would like): i) trading off higher total consumer traffic for higher revenues per consumer visit; ii) influencing stores' choices of strategic variables (e.g. pricing) once they have decided to affiliate. We characterize the conditions under which there would be no role for search diversion as a strategic instrument for the intermediary, thereby showing that it occurs even when the contracting space is significantly enriched. We then discuss several applications related to on-line and brick-and-mortar intermediaries.
Notes: "August 2007, revised February 2009, May 2010"--Publisher's website.

"First draft: Aug. 2007, this draft: Apr. 20th, 2010"--added t.p.

Originally published as: Designing a two-sided platform: when to increase search costs? c2007.

Includes bibliographical references.