Informational Complementarity

Title: Informational Complementarity

Speaker: LIN, Song (Hong Kong University of Science and Technology, Assistant professor）

Time: 2:30-4:00pm, Oct. 12, 2018 (Friday)

Venue: Wang Daohan Conference Room, Lingnan Hall

Language: Chinese/English

Abstract:

Many products are correlated because they share some similar or common attributes.  We show that when these attributes are uncertain to consumers, a complementarity effect can arise among competing products, in the sense that a lower price of one product may increase the demands of others.  The effect occurs when consumers optimally search for information about both common and idiosyncratic product attributes prior to purchase. We characterize the optimal search strategy for the correlated search problem and provide the conditions for the existence of the complementarity effect.  We further explore the implications of the effect for pricing. When firms compete in price, although product correlation may weaken differentiation between the firms, the complementarity effect due to correlated search may raise equilibrium price and profit.

Introduction of speaker:

Professor Song Lin is an assistant professor from Hong Kong University of Science and Technology. He received his PHD from Massachusetts Institute of Technology. His research interests include product and pricing policies, consumer learning and search, new products, platform design, and advertising. He has several papers published at top-tier journals, such as Marketing Science and Journal of Marketing Research.