Time Costs and Search Behavior

Sequential search is often costly and time-consuming. The time cost is usually unknown ex ante and its presence and duration must be inferred as the search progresses. We disentangle the effect of time cost on search behavior from people’s (in)ability to perceive time delay between offers. We find that people are able to infer the existence of the time cost, but their inference is imperfect. We also compare the effect of time cost with the effect of monetary cost and find that the time cost reduces the amount of exerted search, but not as much as the monetary cost does. Discriminating between the effects is critical for increasing the empirical validity of search models and designing mechanisms capable of improving the quality of decisions, especially in unfamiliar or infrequently encountered situations.