A new version of this paper, co-authored with Cole Williams, has become available on November 24, 2021. The paper shows that in search markets an influencer who recommends a product to her followers improves consumer surplus and total welfare despite the firm paying for her recommendation. As consumers learn their value for the product upon search, a consumer will not follow the recommendation if they learn their value is low. The threat of search incentivizes firms to offer the influencer a financial contract involving a commission and incentivizes the influencer to be honest in her recommendation.
For the paper, please click here.