This paper presents a multi-channel search model, where each channel consists of multiple firms that are ex ante homogeneous to consumers. Consumers, nevertheless, ex ante can tell channels apart in the following aspects: search costs, product quality, product availability and price distributions. We first analyze the channel selection problem and show that a consumer’s optimal channel selection at any stage of the search is independent of found prices. We further show that the optimal channel choice can be determined using each channel’s reservation price and consumer valuation. We then apply this model to study the competition between legitimate and pirated products. One immediate result is reducing piracy services has no impact on consumers’ decision to pirate. When pirated products pose a threat, legitimate firms may respond by giving up low search cost consumers. This leads to the surprising result that piracy threat may induce firms to increase their product prices.
Geng, Xianjun and Lee, Young Jin, "Multi-Channel Sequential Search with Application to Piracy" (2009). ICIS 2009 Proceedings. Paper 54.