Consumers Networks and Search Equilibria

I explore the effect of local information sharing among consumers on market functioning. Consumers are embedded in a consumers network, they may costly search non-sequentially for price quotations and the information gathered are non-excludable along direct links. I first show that when search costs are low consumers randomize between searching for one price and two price quotations (high intensity search equilibrium). Otherwise, consumers randomize between searching for one price and not searching at all (low intensity search equilib-rium). Second, in both equilibria consumers search less frequently in denser networks. Finally, when search costs are low the expected price and the social welfare increase as the consumers network becomes denser. These results are reverse when search costs are high