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Consumer Sequential Search: Not Enough or Too Much?

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Author Info

  • Rami Zwick

    ()
    (Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

  • Amnon Rapoport

    ()
    (University of Arizona, Management and Policy, P.O. Box 210108, Tucson, Arizona 85721-0108)

  • Alison King Chung Lo

    ()
    (Duke University, Fuqua School of Business, Durham, North Carolina 27708-0120)

  • A. V. Muthukrishnan

    ()
    (Hong Kong University of Science and Technology, Clear Water Bay, Kowloon Hong Kong)

Abstract

We study sequential search behavior in a generalized "secretary problem" in which a single object is to be selected from a set ofalternatives. Alternatives are inspected in a random order, one at a time, and only the rank order of the current alternative relative to the ones that have already been observed can be ascertained. At each period, the consumer may either accept the current alternative, continue to search and pay a fixed cost, or recall an alternative that has already been inspected. A recalled alternative is assumed to be available with a known probability. The consumer's goal is to select the overall best alternative from the fixed set. We describe the results of an experiment designed to test the optimal model and compare it to a behavioral decision model that incorporates local patterns of the observed sequence. Both set size and search cost are manipulated experimentally in a 2x2 factorial design. Our results show that cost and set size affect the amount of search in the predicted direction. However, in the two no-cost conditions subjects search too little in comparison to the optimal model, whereas in the two cost conditions they search too much. The behavioral decision rule that we propose provides a possible account for the observed pattern of the behavioral regularities.

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File URL: http://dx.doi.org/10.1287/mksc.22.4.503.24909
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Bibliographic Info

Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 22 (2003)
Issue (Month): 4 (October)
Pages: 503-519

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Handle: RePEc:inm:ormksc:v:22:y:2003:i:4:p:503-519

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Related research

Keywords: Search Behavior; Sequential Choice Models; Behavioral Decision Rules; Information Processing;

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Citations

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Cited by:
  1. Babur De Los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2012. "Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior," American Economic Review, American Economic Association, vol. 102(6), pages 2955-80, October.
  2. Schunk, Daniel, 2009. "Behavioral heterogeneity in dynamic search situations: Theory and experimental evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 33(9), pages 1719-1738, September.
  3. Feri, Francesco & Gantner, Anita, 2011. "Bargaining or searching for a better price? - An experimental study," Games and Economic Behavior, Elsevier, vol. 72(2), pages 376-399, June.
  4. Botti, Simona & Hsee, Christopher K., 2010. "Dazed and confused by choice: How the temporal costs of choice freedom lead to undesirable outcomes," Organizational Behavior and Human Decision Processes, Elsevier, vol. 112(2), pages 161-171, July.
  5. Bing Jing, 2007. "Product differentiation under imperfect information: When does offering a lower quality pay?," Quantitative Marketing and Economics, Springer, vol. 5(1), pages 35-61, March.
  6. Daniel Schunk & Joachim Winter, 2005. "The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment," MEA discussion paper series 05077, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  7. Huang, Yanliu & Hutchinson, J. Wesley, 2013. "The roles of planning, learning, and mental models in repeated dynamic decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 122(2), pages 163-176.
  8. Marcela Ibanez & Simon Czermak & Matthias Sutter, . "Searching for a better deal ? On the influence of group decision making, time pressure and gender in a search experiment," Working Papers 2008-05, Faculty of Economics and Statistics, University of Innsbruck.
  9. Fiona Scott Morton & Jorge Silva-Risso & Florian Zettelmeyer, 2011. "What matters in a price negotiation: Evidence from the U.S. auto retailing industry," Quantitative Marketing and Economics, Springer, vol. 9(4), pages 365-402, December.
  10. Eriksson, Kimmo & Strimling, Pontus, 2010. "The devil is in the details: Incorrect intuitions in optimal search," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 338-347, August.
  11. Bearden, J. Neil & Connolly, Terry, 2007. "Multi-attribute sequential search," Organizational Behavior and Human Decision Processes, Elsevier, vol. 103(1), pages 147-158, May.
  12. Jos van Ommeren & Giovanni Russo, 2004. "Sequential or Non-sequential Recruitment?," Tinbergen Institute Discussion Papers 04-109/3, Tinbergen Institute, revised 15 Sep 2008.
  13. Nakajima, Daisuke & Masatlioglu, Yusufcan, 2013. "Choice by iterative search," Theoretical Economics, Econometric Society, vol. 8(3), September.

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