EXPRESS: Prominent Retailer and Intra-brand Competition

Online retail search traffic is often concentrated at a “prominent” retailer for a product. The authors unpack the ramification of this pattern on pricing, profit, and consumer welfare in an intra-brand setting. Prominence denotes a larger number of heterogenous search cost consumers starting their search at the prominent retailer than at any other retailer. This analyses show that search traffic concentration can intensify intra-brand competition, can lower average prices of all retailers, and can improve consumer welfare. Interestingly, the prominent retailer's incremental traffic advantage can increase or reduce its own profit; the authors denote these as the “blessing” and “curse” of prominence respectively. The authors extend their analysis to a setting where consumers consider searching only amongst those retailers of whom they are individually aware of; the prominent retailer is included in all these individual awareness sets. The effects on market average prices and welfare carry over, but only below a critical threshold level of the prominent retailer's first-search traffic advantage. Above this threshold, market average prices rise and welfare decreases, making this the region where search concentration warrant scrutiny from policy makers. The authors close with policy remedies, and managerial implications of search concentration.