The Limits of Search Algorithms
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arXiv
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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2025
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| Subjects: | |
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| _version_ | 1866910859646730240 |
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| author | Chen, Xiaoyu Huang, Jingmin Lian, Yibo |
| author_facet | Chen, Xiaoyu Huang, Jingmin Lian, Yibo |
| contents | A platform commits to a search algorithm that maps prices to search order. Given this algorithm, sellers set prices, and consumers engage in sequential search. This framework generalizes the ordered search literature. We introduce a special class of search algorithms, termed ''contracts,'' show that they implement all possible equilibrium prices and then characterize the set of implementable prices. Within this set, we identify the seller-optimal contract, whose first-best outcome remains an open problem for a multiproduct seller. Our findings highlight the conditions under which the platform favors price dispersion or price symmetry. Furthermore, we characterize the consumer-optimal and socially optimal contracts, which exert opposing forces to the seller-optimal contract: while the seller-optimal contract promotes higher prices, the consumer-optimal and socially optimal contracts favor lower prices. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2503_03497 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | The Limits of Search Algorithms Chen, Xiaoyu Huang, Jingmin Lian, Yibo Theoretical Economics A platform commits to a search algorithm that maps prices to search order. Given this algorithm, sellers set prices, and consumers engage in sequential search. This framework generalizes the ordered search literature. We introduce a special class of search algorithms, termed ''contracts,'' show that they implement all possible equilibrium prices and then characterize the set of implementable prices. Within this set, we identify the seller-optimal contract, whose first-best outcome remains an open problem for a multiproduct seller. Our findings highlight the conditions under which the platform favors price dispersion or price symmetry. Furthermore, we characterize the consumer-optimal and socially optimal contracts, which exert opposing forces to the seller-optimal contract: while the seller-optimal contract promotes higher prices, the consumer-optimal and socially optimal contracts favor lower prices. |
| title | The Limits of Search Algorithms |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2503.03497 |