Abstract

This paper presents a sequential search model where consumers look for several products and multiproduct …rms compete in prices. In such a multiproduct search market, both consumer behavior and …rm behavior exhibit di¤erent features from the single-product case: a consumer often returns to previously visited …rms before running out of options; and prices can decrease with search costs and increase with the number of …rms. The framework is then extended in two directions. First, by introducing both single-product and multiproduct searchers, the model can explain the phenomenon of countercyclical pricing, i.e., prices of many retail products decline during peak-demand periods. Second, by allowing …rms to use bundling strategies, the model sheds new light on how bundling a¤ects market performance. In a search environment, bundling tends to reduce consumer search intensity, which can soften competition and reverse the usual welfare assessment of competitive bundling in a perfect information setting.