Search Deterrence by Time-Limited Retail Channels: Information Design and Discount Strategy

This paper investigates how time-limited retail channels influence consumer search behavior and sellers' operational decisions. We model a live-streaming channel as an exploding channel (EC), a time-limited channel that simultaneously delivers product information and price discounts, and incorporate it into a classical consumer search framework with a normal channel (NC). Using a game-theoretic consumer search model, we identify a novel search deterrence mechanism whereby the EC's information design and discount structure can partially or fully suppress consumers' incentive to search in the NC. When NC search costs are high, the EC completely eliminates search in the NC. As EC search costs increase, sellers transition from offering no discounts to introducing price discounts, while information provision becomes less essential. When NC search costs are low, optimal seller strategy requires jointly deploying information design and price discounts, producing a counterintuitive form of price discrimination in which high-valuation consumers purchase at lower prices than low-valuation consumers. At the system level, the impact of EC adoption is non-monotonic. The EC can improve consumer surplus under pure information design, yet price discounts may constitute nominal reductions that leave consumer surplus unchanged. When channel search costs converge, total welfare may deteriorate, and competing firms' simultaneous EC adoption can trigger a prisoner's dilemma.