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An Experiment to Investigate the Externalities of Search

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  • LOUISE ALLSOPP

Abstract

This paper presents an experiment to investigate the impact of information externalities in a search model. The model implies that information spillovers create an initial delay in action by agents, followed by a flurry of activity once some public information is revealed. Conversely, this experiment reveals a shorter delay prior to the first subject moving than the model suggests. Furthermore, the subsequent increase in activity is greater than predicted. However, as the sessions progress, the subjects exhibit a degree of learning in each treatment. They prolong their search for higher payouts and, hence, their behaviour approaches that of the model's optimal strategy.

Suggested Citation

  • Louise Allsopp, 2004. "An Experiment to Investigate the Externalities of Search," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 423-435, December.
    • Handle: RePEc:bla:ecorec:v:80:y:2004:i:251:p:423-435
    DOI: 10.1111/j.1475-4932.2004.00199.x
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