1Previous versions have circulated as Costly Search and Design.We thank for their helpful

The Internet has made consumer search easier, with consequences for prices, industry structure and the kinds of products o¤ered. We explore these conse-quences in a rich but tractable model that allows for strategic design choices. A polarized market structure results, where some \u85rms choose designs aimed at broad-based audiences, while others target narrow niches. Such an industry structure can arise even when all \u85rms and consumers are ex-ante identical. We analyze the e¤ect of reduced search costs and \u85nd results consistent with the reported prevalence of niche goods and the long-tail and superstar phe-nomena. In particular, the model suggests that long-tail e¤ects arise when there is a wide range of potential designs, relative to vertical heterogeneity among rms