Optimal Search with Costly Recall
AbstractThis paper builds a consumer search model where the cost of going back to stores already searched is explicitly taken into account. We show that the optimal search rule under costly recall is very different from the optimal search rule under perfect recall. Under costly recall, the optimal search behaviour is nonstationary and, moreover, the reservation price is not independent of previously sampled prices. We fully characterize the optimal search rule under costly recall when a finite number of firms draws price quotes from a given distribution.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-002/1.
Date of creation: 11 Jan 2007
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Search; Costly Recall;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-23 (All new papers)
- NEP-DGE-2008-02-23 (Dynamic General Equilibrium)
- NEP-ORE-2008-02-23 (Operations Research)
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