Online Shopping Intermediaries: The Strategic Design of Search Environments

Anthony Dukes, Lin Liu
2016 Management science  
An online shopping intermediary is an internet platform for consumers and third-party sellers to transact. Shopping intermediaries provide a search environment (e.g. search aids) to lower consumers' search costs in finding and evaluating sellers' products. In a theoretical model, we study strategic incentives of an intermediary in the design of its search environment as a means to ease search costs. An important aspect of our analysis is that consumers optimally decide how many sellers to
more » ... te and how deeply (e.g. number of attributes) to evaluate each of them. We find that the equilibrium search environment embeds enough search costs to prevent consumers from evaluating too many sellers, but not too much to prevent them from evaluating sellers' products partially. When facing consumers of heterogeneous search abilities, the search environment has all consumers evaluating products at full depth and consumers with higher evaluation abilities evaluating more sellers. We also show that intermediaries embed weakly less search costs with competition.
doi:10.1287/mnsc.2015.2176 fatcat:l57ek3n2zbhodguff25cbyknyi