Consumer obfuscation by a multiproduct firm

Authors: Vaiva Petrikaite

RAND Journal of Economics, Vol. 49, No 1, 206-223, February, 2018

This article shows that a multiproduct firm has incentives to obfuscate its products by using search costs to induce consumers to search through its products in a particular order. The consumers who draw high valuations of the first product terminate their search earlier than the consumers who draw low valuations. Thus, the firm has incentives to raise the price of the earlier searched product. The optimal search cost for an obfuscated product is such that consumers inspect the product only if the match values of the previously searched goods have been very poor.