Discriminatory Search Deterrence

If consumers can either costly acquire product information or make their purchase decision merely based on the information provided by the seller, how should the seller design her pricing and information policies? When the consumers’ search cost is publicly observed, it has been well-established that the seller’s optimal information provision fully deters the consumer from engaging in information acquisition. We show that this is, however, not necessarily true with privately observed search cost. Moreover, when consumers’ search cost is either relatively high or zero, we characterize the seller’s optimal menu of prices and information policies featuring discriminatory search deterrence levels.