Consider a variation on the classic Weitzman search problem , in which competing firms can choose how much information about their product to reveal to a consumer. If there are no search frictions,  there is a unique symmetric equilibrium in pure strategies ; and for any market of finite size, the firms are not fully informative. With search frictions, if the expected value of the prize is sufficiently high, there is a unique symmetric equilibrium in which firms are fully informative. Remarkably , a small search cost leads to the perfect competition level of information provision: consumers gain when firms are forced to compete on information  .
We consider a variation on the classic Weitzman search problem : competing firms with products of unknown quality may design how much information a consumer's visit will glean. After observing these information structures, the consumer then decides how to search sequentially across the firms for a high value product. If there are no search frictions, then there is a unique symmetric equilibrium in pure strategies , and the firms are not fully informative. With search frictions, the information a visit will reveal depends in a systematic way on the ex-ante probability that a firm's product is high quality. When the expected quality of the product is sufficiently high, there is a unique symmetric equilibrium in which firms are fully informative. There , a small search cost leads to the perfect competition level of information provision--consumers gain when firms are forced to compete on information . Conversely, in the low and medium expected quality cases there are no pure strategy equilibria. Instead, firms mix over a continuum of levels of information: in the low expected quality case they provide full information with probability zero; and in the medium expected quality case they provide full information with positive probability. In both cases there are mixed strategy equilibria in which the firms' realized information structures are Blackwell comparable. Moreover, though recall is permitted, in each case there are equilibria in which the consumer never returns .
R
Consider
We consider
R
, in which competing firms can choose
: competing firms with products of unknown quality may design
R
about their product to reveal to a consumer.
a consumer's visit will glean. After observing these information structures, the consumer then decides how to search sequentially across the firms for a high value product.
A
then
R
; and for any market of finite size,
, and
R
if the expected value of the prize
the information a visit will reveal depends in a systematic way on the ex-ante probability that a firm's product is high quality. When the expected quality of the product
R
Remarkably
There
R
provision: consumers
provision--consumers
A
. Conversely, in the low and medium expected quality cases there are no pure strategy equilibria. Instead, firms mix over a continuum of levels of information: in the low expected quality case they provide full information with probability zero; and in the medium expected quality case they provide full information with positive probability. In both cases there are mixed strategy equilibria in which the firms' realized information structures are Blackwell comparable. Moreover, though recall is permitted, in each case there are equilibria in which the consumer never returns