PhD Defense R.P. Greminger

• Location: Cobbenhagen building, Aula
• Supervisors: Prof. T. Klein, Prof. J.H. Abbring

Research summary

Consumers typically do not know all available alternatives, prices, and what they offer. Hence, they cannot just buy the alternative they prefer. Instead, consumers first gather information and compare options before eventually purchasing an alternative. As comprehensive literature shows, this mechanism leads to various implications for how firms compete and how they can influence which alternatives consumers eventually choose.

The first chapter in this thesis adds to this line of research by focusing on the implications of a particular aspect of how consumers gather information: product discovery. Specifically, I introduce and solve a model for how a consumer decides between discovering more alternatives and searching among previously found alternatives. Using the model, I then highlight an important implication of consumers not being aware of all products: alternatives discovered early in the search process are more likely to get purchased.

The second chapter poses the question of how well an online search intermediary’s interests are aligned with those of consumers when determining the order in which consumers can discover products. By estimating the model introduced in the first chapter, I find that there is not a strong misalignment of interests. As I show, this is an implication of consumers not discovering all products: if the platform first displays alternatives that are too expensive (and, therefore, disliked by consumers), consumers leave the website without buying any product, which, in turn, would lead to lower sales.

The third and final chapter, co-authored with Yufeng Huang and Ilya Morozov, introduces and solves a simple model for a consumer deciding how to spend time discovering alternatives in multiple product categories. The model serves to highlight how time being a scarce resource limits how many alternatives consumers may consider and how it can link search behavior across otherwise unrelated product categories. For example, if a consumer decides to spend all available time searching for shoes, there will be no time left searching for shirts. This final chapter, therefore, formalizes an explanation for why consumers often do not search until they have found all available alternatives: to search in a product category, a consumer has to give up time that could be spent searching in another category or doing something else entirely.