Influencing Search

Janssen, Maarten C W; Williams, Cole

Abstract

We show that in search markets an influencer who recommends a product to her followers improves consumer surplus and total welfare despite the firm paying for her recommendation. As consumers learn their value for the product upon search, they will not buy at the recommended firm if they learn their value is low. The threat of search incentivizes firms to offer the influencer a financial contract involving a commission and incentivizes the influencer to be honest in her recommendation. Provided the influencer's search cost is not too high, she also has an incentive to acquire information and give informative recommendations. These informative equilibria are more difficult to sustain if influencers compete with each other.

Citation

Janssen, M. C. W., & Williams, C. (2024). Influencing Search. The RAND Journal of Economics, 55(3), 442-462. https://doi.org/10.1111/1756-2171.12475

• Journal Article Type: Article
• Acceptance Date: Mar 1, 2023
• Online Publication Date: Sep 8, 2024
• Publication Date: Sep 30, 2024
• Deposit Date: Jun 28, 2024
• Publicly Available Date: Sep 10, 2024
• Journal: The RAND Journal of Economics
• Print ISSN: 0741-6261
• Electronic ISSN: 1756-2171
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 55
• Issue: 3
• Pages: 442-462
• DOI: https://doi.org/10.1111/1756-2171.12475
• Public URL: https://durham-repository.worktribe.com/output/2504995