Search Deterrence
Mark Armstrong (University of Oxford)

A seller usually wishes to prevent the discovery of rival o¤ers by its prospective customers. We study sales techniques which serve this purpose by making it harder for a customer to return to buy after a search for alternatives. These include making an exploding o¤er, o¤ering a .buy-now.discount, or requiring payment of a deposit in order to buy later. It is unilaterally pro.table for a seller to deter search under mild conditions, but sellers can su¤er when all do so. In a monopoly setting where the buyer has an uncertain outside option, the optimal selling mechanism features both buy-now discounts and deposit contracts. When a seller cannot commit to its policy, it exploits the inference that those consumers who buy later have no good alternative. In many cases the outcome then involves exploding offers, so that no consumers return to buy after search. Joint with Jidong Zhou.

Keywords: Consumer search, sales techniques, price discrimination, sequential screening.

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Competition in the Presence of Individual Demand Uncertainty
Makoto Watanabe (VU University Amsterdam)

This paper sheds light on an empirical controversy about the effect of competition on price discrimination. We propose a model in which consumers learn their preferences over time and show that firms offer advance purchase discounts. Consumers choose between an early (uninformed) purchase at a low price and a late (informed) purchase at a high price. Competing firms offer higher discounts to secure a large market share in advance. Competition decreases welfare and may affect consumers negatively. The empirical finding, that competition may influence price dispersion positively or negatively, can be explained by differences in the level of demand uncertainty. Joint with Mark Möller.