Consumer Search, Steering, and Choice Overload

We develop a model of within-firm sequential, directed search and study a firm's ability and incentive to steer consumers. We find that the firm often benefits from adopting a noisy positioning strategy, which limits the information available to consumers. This induces consumers to keep searching but discourages some of them from visiting the firm. This occurs even though the firm and the consumers have in common an interest in maximizing the probability of trade. Because of such noisy positioning, an increase in the size of the product line further discourages consumers from visiting the firm-consistent with choice overload.

Automated summary

We develop a model to study the firm's ability and incentive to guide consumers. We find that a noisy positioning strategy can limit consumer information, leading them to keep searching while discouraging some from visiting the firm. Even though both the firm and consumers want to maximize the probability of trade, an increase in the product line size further discourages consumers from visiting, consistent with choice overload.