Search with Learning
AbstractThis paper provides a method to estimate search costs in an environment in which consumers are uncertain about the price distribution. Consumers learn about the price distribution by Bayesian updating their prior beliefs. The model provides bounds on the search costs that can rationalize observed search and purchasing behavior. Using individual-specific data on web browsing and purchasing behavior for electronics sold online we show how to use these bounds to estimate search costs. Estimated search costs are sizable and are found to relate to consumer characteristics in intuitive ways. The model outperforms a standard sequential search model in which the price distribution is known to consumers.
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Bibliographic InfoPaper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2012-03.
Date of creation: Aug 2012
Date of revision:
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Web page: http://www.bus.indiana.edu/bepp/
More information through EDIRC
consumer search; learning; electronic commerce;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-COM-2012-09-09 (Industrial Competition)
- NEP-MKT-2012-09-09 (Marketing)
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.:
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