Competitive Information Design in Sequential Search
2026-06-02 • Computer Science and Game Theory
Computer Science and Game Theory
AI summaryⓘ
The authors extend a previous model where advertisers share information with consumers by adding competition between multiple advertisers. They study how consumers decide which products to inspect further when checking information is costly, using an existing algorithm for optimal search. The authors develop a method to see if an advertiser's information strategy is the best response to competitors and prove that stable outcomes (equilibria) exist under certain conditions. They also describe what these equilibria look like when product qualities follow specific patterns and explain the economic reasons behind these patterns.
Information DesignGame TheoryBayesian EquilibriumHorizontal DifferentiationSequential SearchWeitzman's Index AlgorithmDuality ArgumentsPrior DistributionsSymmetric Equilibrium
Authors
Zhicheng Du, Hu Fu, Ying Qin, Zihe Wang
Abstract
Advertisements often strategically disclose information to consumers who make decisions on further information acquisition and eventual purchase. Anderson and Renault (2006) model this problem using an information design framework, where the advertiser acts as a sender and the consumer as a receiver. We extend this model to a competitive setting with horizontally differentiated senders competing for a unit-demand receiver. Under costly inspection, the receiver's optimal sequential search action is given by Weitzman's Index Algorithm. We give a method, based on duality arguments, to verify whether a sender's given information strategy constitutes a best response against his competitors (other senders). We establish the existence of an equilibrium in the game among senders when the prior distributions have no mass; we also illustrate that such equilibria may exhibit intricate behaviors. Finally, we meticulously characterize symmetric equilibria played by the senders for cases when the prior distributions have monotone increasing densities, while offering economic intuitions behind the insightful equilibrium structure.