Tobias Gamp

Research

Biased Beliefs in Search Markets [AEJ Micro 2023] [pdf]

(with Daniel Krähmer)

We study the implications of biased consumer beliefs for search market outcomes. Biased consumers base their search strategy on a belief function which specifies for any (true) distribution of utility offers in the market a possibly incorrect distribution of utility offers. We show that if biased consumers overestimate the best offer in the market, a novel type of equilibrium may emerge in which firms make penny sales offers in order to meet biased consumers’ unreasonable high expectations which then become partially self-fulfilling. As a result, the presence of biased consumers may improve the welfare of all consumers.

Competition in Search Markets with naive consumer [RAND 2022] [pdf]

(with Daniel Krähmer)

We study the interplay between deception and consumer search in a search market where firms may deceive some naive consumers with inferior products that display hidden (bad) attributes. We derive an equilibrium in which both superior and inferior quality is offered and show that as search frictions vanish, superior goods are entirely driven out of the market. Deception harms sophisticated consumers, as it forces them to search longer to find a superior product. We argue that policy interventions that reduce search frictions such as the standardization of price and package formats may harm welfare. In contrast, reducing the number of naive consumers through transparency policies and education campaigns as well as a minimum quality standard can improve welfare.

Guided Search [R&R Rand] [pdf]

Is it profitable for a multi-product firm to help its customers find their preferred products? In this article, I study a seller who can influence the information acquisition of a buyer inspecting her products by raising wasteful search costs, which I interpret as the obfuscation of product information. I show that obfuscation is a profitable sales technique, as it allows the seller to influence the buyer's search order, so that, at an optimum, the buyer purchases the most expensive product that supplies him with positive utility. The buyer's equilibrium utility, on the contrary, does not necessarily exceed zero. Nevertheless, obfuscation may lead to welfare improvements. In equilibrium, polarizing products are the most expensive ones. My results suggest that informational frictions emerge endogenously if firms have market power.

Search, Differentiated Products and Obfuscation [pdf]

I study a market model, where consumers may either search sequentially for suitable products or, in contrast to the previous literature, may purchase products immediately and poorly informed. In comparison to the market outcome in the absence of the option to purchase immediately, market prices increase. Product differentiation is not necessarily profitable for firms anymore. Resulting concerns that firms might fail to provide the welfare optimal, rich variety of products are gratuitous if product design is endogenous. I endogenize search costs so that firms may influence the consumers' acquisition of product information through obfuscation. Although, a firm's search costs signal consumers whether its offer is good or bad, firms obfuscate product information and equilibrium search costs maximize industry profits.

Consideration Sets and Competitive Marketing: Corrigendum
(with Kfir Eliaz and Ran Spiegler)

Eliaz and Spiegler [2011] proposed a model of competitive marketing when consumers have limited propensity to consider all feasible market alternatives. A key result in the paper stated that there always exists a symmetric equilibrium in which firms earn the max-min profit. This statement turns out to be incorrect, and in this corrigendum we provide a necessary condition on the ”consideration function” for the existence of an equilibrium with max-min payoffs for any ”admissible” cost structure.

[pdf] [Consideration Sets and Competitive Marketing]

Work in progress

Consumer Tracking in Search Markets: Optimal Cookie Design

How to get advise from reputation concerned experts
(with Amir Habibi and Vincent Meisner)