Quality Strategies in Frictional Search Models
Journal
Journal of Economics & Management Strategy
ISSN
1058-6407
Publisher
Wiley
Date Issued
2025-05-05
Author(s)
Type
text::journal::journal article
Abstract
We explore quality-based strategies in frictional online markets using a targeted search model with vertical differentiation and heterogeneous agents. Firms self-select into high- or low-quality segments and compete in prices. We demonstrate that reduced search costs amplify the prominence of quality, leading to an increase in the market share of high-quality designs. While low-quality firms dominate when cost differentials are large, declining search frictions amplify the prominence of the quality attribute. The raised importance of quality triggers dual effects: a higher price sensitivity, leading to further price reductions across all products, and a boost in demand for high-quality designs. Our findings offer insights into the recent dynamics of online markets, explaining the expansion of high-quality segments and providing a strategic framework for firms to navigate evolving consumer preferences in increasingly transparent markets. ©The author ©Journal of Economics & Management Strategy ©Wiley.
License
Acceso Restringido
How to cite
Morganti, P. (2025). Quality Strategies in Frictional Search Models. Journal of Economics & Management Strategy. https://doi.org/10.1111/jems.12642