Babur De los Santos (Department of Business Economics and Public Policy, Indiana University Kelley School of Business) Ali Hortacsu (University of Chicago and NBER) Matthijs R. Wildenbeest (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
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Using a large data set on web browsing and purchasing behavior we test to what extent consumers are searching in accordance to various classical search models. We nd that the benchmark model of sequential search with a known distributions of prices can be rejected based on the recall patterns we observe in the data. Moreover, we show that even if consumers are initially unaware of the price distribution and have to learn the price distribution, observed search behavior for given consumers over time is more consistent with non-sequential search than sequential search with learning. Our ndings suggest non-sequential search provides a more accurate description of observed consumer search behavior. We then utilize the non-sequential search model to estimate the price elasticities and markups of online book retailers.
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number
2009-05.
Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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