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Title: Search in an Emerging Market (joint with James Dana and Johannes Hörner).

Abstract: We study a growing market in which consumers observe prices, but discovering whether a firm’s product is a good fit is costly. Consumers purchase repeatedly, and their match values are persistent. In equilibrium, firms initially offer the good for free to build a consumer base and later hike their prices. The rate at which firms begin charging positive prices increases as the market matures. Different monetization dates generate persistent differences among initially identical firms. Firms that monetize earlier are smaller, niche providers charging higher prices, whereas firms that monetize later are larger and charge lower, though rising, prices. Consequently, prices and firm sizes remain dispersed, and consumer mass becomes increasingly concentrated among a shrinking set of firms.