How to Segment a Search Market: Information Design and Directed Search
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arXiv
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| Format: | Preprint |
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2025
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| _version_ | 1866918135160897536 |
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| author | Mekonnen, Teddy |
| author_facet | Mekonnen, Teddy |
| contents | This paper examines when the public provision of information in search markets improves welfare. I consider a two-sided frictional search market in which buyers match with vertically differentiated sellers. The market is segmented into submarkets based on seller types. Such segmentation serves as a public signal that buyers use to direct their search. Given a segmentation, I characterize both the socially efficient and the equilibrium allocation of buyers across submarkets, and identify a Hosios-type condition under which the equilibrium allocation is efficient. I then analyze the design of surplus-maximizing segmentations, showing that the nature of search externalities determines when the constrained-efficient segmentation fully separates seller types or pools them into at most a binary partition. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2501_11753 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | How to Segment a Search Market: Information Design and Directed Search Mekonnen, Teddy Theoretical Economics This paper examines when the public provision of information in search markets improves welfare. I consider a two-sided frictional search market in which buyers match with vertically differentiated sellers. The market is segmented into submarkets based on seller types. Such segmentation serves as a public signal that buyers use to direct their search. Given a segmentation, I characterize both the socially efficient and the equilibrium allocation of buyers across submarkets, and identify a Hosios-type condition under which the equilibrium allocation is efficient. I then analyze the design of surplus-maximizing segmentations, showing that the nature of search externalities determines when the constrained-efficient segmentation fully separates seller types or pools them into at most a binary partition. |
| title | How to Segment a Search Market: Information Design and Directed Search |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2501.11753 |