- Optimal Product Placement
- Review of Industrial Organization
- Volume | Issue number
- 51 | 1
- Pages (from-to)
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
We model a market, such as an online software market, in which an intermediary connects sellers and buyers by displaying sellers’ products. With two vertically-differentiated products, an intermediary can place either: (1) one product, not necessarily the better one, on the first page, and the other hidden on the second page; or (2) both products on the first page. We show that it can be optimal for the intermediary to obfuscate a product—possibly the better one—since this weakens price competition and allows the sellers to extract a greater surplus from buyers; however, it is not socially optimal. The choice of which one to obfuscate depends on the distribution of search costs.
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