Partial Sequential Search and Product Differentiation

Anderson and Renault (1999) show that when search cost is needed to evaluate any product, a U-shaped relationship exists between equilibrium price and product differentiation. This paper revisits this relationship by incorporating partial-depth search in a sequential search process which allows consumers to evaluate a subset of product attributes. We show that, when search depth is endogenous, the relationship is either always positive or N-shaped, depending on the elasticity of the hazard rate function of utility distribution