Vaiva Petrikaite, Vilnius University
"How much to inform a handyman beforehand"
The paper studies a market with personalized services, personal pricing and differentiated service provision costs. In the model, consumers may choose to provide information about their needs online, which would help to determine service provision costs and encourage firms to post their prices in a platform. Alternatively, consumers may choose to make costly offline contacts with service providers, during which service provision costs are observed and price offers are made. In equilibrium, consumer information provision online varies from none, when production costs are negatively correlated across firms, to all, when the correlation of the costs across firms is positive. Prices are set after online contacting in the first case, and firms always post prices online in the second case. If service provision costs are consumer- and firm-specific, then equilibrium is in mixed strategies mostly. In that case, consumers provide partial information online and firms mix between low prices and invitations for offline contacts, and high prices and online contracting.
Contact person: Nick Vikander