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Variety and the cost of search in supermarket retailing

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  • Richards, Timothy J.
  • Yonezawa, Koichi
  • Hamilton, Stephen F.

Abstract

It is generally not optimal for consumers to become perfectly informed about all prices and all available products in a multi-product retail environment when search is costly. We examine the link between the cost of search and product variety o¤ered by multi-product retailers. Using a hierarchical model in which consumers search among stores and then among brands, we nd statistically signi cant costs both for search among stores and for brands within a store. We also nd that the costs of search rise with variety, suggesting that retailers may improve their market power by increasing assortment depth.

Suggested Citation

  • Richards, Timothy J. & Yonezawa, Koichi & Hamilton, Stephen F., 2014. "Variety and the cost of search in supermarket retailing," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182778, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182778
    DOI: 10.22004/ag.econ.182778
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    More about this item

    Keywords

    Consumer/Household Economics;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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