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.
The paper closest in content to this paper is Competitive Information Disclosure in Search Markets" (Board and Lu (2017)) @cite_19 . There, the authors examine the case of a collection of sellers competing to persuade a prospective buyer to purchase one of their products. Each seller has the same set of products to sell and designs an experiment in order to sway the buyer's opinion on the product. In contrast to our paper, buyers pick a seller at random; and moreover, the state of the world upon which the searchers' utility depends is common. Here, the information provided by each box provides the searcher with no information about the contents of any of the other boxes.
@cite_19
2557199769
Buyers often search across sellers to learn which product best fits their needs. We study how sellers manage these search incentives through their disclosure strategies (e.g., product trials, reviews, and recommendations) and ask how competition affects information provision. If sellers can observe the beliefs of buyers or can coordinate their strategies, then there is an equilibrium in which sellers provide the "monopoly level" of information. In contrast, if buyers' beliefs are private, then there is an equilibrium in which sellers provide full information as search costs vanish. Anonymity and coordination thus play important roles in understanding how advice markets work.