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Three heuristics of search for a low price when initial information about the market is obsolete

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Author Info
Michal Skořepa () (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, Czech National Bank, Prague, Czech Republic)

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Abstract

In traditional economics, buyer behaviour is usually modelled under the assumption of full information either on prices and their locations within the market or at least on the probability distribution of prices in the market. Neither of these assumptions seems appropriate in some cases such as when the buyer enters the specific market only very infrequently (e.g., markets for durables). This paper studies experimentally the search rules that buyers might use in this case of extreme lack of information on prices. The paper identifies three general search heuristics, derives three specific rules from the heuristics and, using data from a small-scale experiment, estimates parameters of the rules.

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Publisher Info
Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2006/17.

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Length: 27 pages
Date of creation: Jul 2006
Date of revision: Jul 2006
Handle: RePEc:fau:wpaper:wp2006_17

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Related research
Keywords: search; heuristics; aspiration level; experiment;

Other versions of this item:

Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Nauro F. Campos & Roman Horváth, 2006. "Reform Redux: Measurement, Determinants and Reversals," Working Papers IES 2006/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006. [Downloadable!]
    Other versions:
  2. Peter Tuchyòa & Martin Gregor, 2005. "Centralization Trade-off with Non-Uniform Taxes," Working Papers IES 81, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005. [Downloadable!]
  3. Alexis Derviz, 2007. "Cross-Border Risk Transmission by a Multinational Bank," AUCO Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 1(1), pages 87-111, March. [Downloadable!]
    Other versions:
  4. Petr Jakubík, 2006. "Does Credit Risk Vary with Economic Cycles? The Case of Finland," Working Papers IES 2006/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006. [Downloadable!]
  5. Karel Janda, 2005. "The Quantitative and Qualitative Analysis of the Budget Cost of the Czech Supporting and Guarantee Agricultural and Forestry Fund," Working Papers IES 86, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005. [Downloadable!]
  6. Karel Janda, 2005. "The Comparative Statics of the Effects of Credit Guarantees and Subsidies in the Competitive Lending Market," Working Papers IES 82, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005. [Downloadable!]
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