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Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior

  • Babur De Los Santos
  • Ali Hortacsu
  • Matthijs R. Wildenbeest

Using a large dataset on web browsing and purchasing behavior we test to what extent consumers are searching in accordance to various search models. We find that the benchmark model of sequential search with a known price distribution can be rejected based on recall patterns found in the data as well as the absence of dependence of search decisions on prices. Our findings suggest fixed sample size search provides a more accurate description of search behavior. We then utilize the fixed sample size search model to estimate demand elasticities of online bookstores in an environment where store preferences are heterogeneous. (JEL D12, D83, L81)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 6 (October)
Pages: 2955-80

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:6:p:2955-80
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  1. Babur De los Santos, 2008. "Consumer Search on the Internet," Working Papers 08-15, NET Institute, revised Sep 2008.
  2. Gabriel Talmain & Chien-Fu Chou, 1990. "Non-Parametric Search," Discussion Papers 92-01, University at Albany, SUNY, Department of Economics.
  3. Han Hong & Matthew Shum, 2006. "Using price distributions to estimate search costs," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 257-275, 06.
  4. Schotter, Andrew & Braunstein, Yale M, 1981. "Economic Search: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 19(1), pages 1-25, January.
  5. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  6. Sonnemans, Joep, 1998. "Strategies of search," Journal of Economic Behavior & Organization, Elsevier, vol. 35(3), pages 309-332, April.
  7. Austan Goolsbee & Judith Chevalier, 2002. "Measuring Prices and Price Competition Online: Amazon and Barnes and Noble," NBER Working Papers 9085, National Bureau of Economic Research, Inc.
  8. M. L. Weitzman, 1978. "Optimal Search for the Best Alternative," Working papers 214, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  10. Harrison, Glenn W & Morgan, Peter, 1990. "Search Intensity in Experiments," Economic Journal, Royal Economic Society, vol. 100(401), pages 478-86, June.
  11. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
  12. Rosenfield, Donald B. & Shapiro, Roy D., 1981. "Optimal adaptive price search," Journal of Economic Theory, Elsevier, vol. 25(1), pages 1-20, August.
  13. Manning, R & Morgan, Peter B, 1982. "Search and Consumer Theory," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 203-16, April.
  14. repec:rje:randje:v:37:y:2006:2:p:257-275 is not listed on IDEAS
  15. Chen, Xiaohong & Hong, Han & Shum, Matthew, 2007. "Nonparametric likelihood ratio model selection tests between parametric likelihood and moment condition models," Journal of Econometrics, Elsevier, vol. 141(1), pages 109-140, November.
  16. Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-44, July.
  17. Kogut, Carl A., 1990. "Consumer search behavior and sunk costs," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 381-392, December.
  18. Rami Zwick & Amnon Rapoport & Alison King Chung Lo & A. V. Muthukrishnan, 2003. "Consumer Sequential Search: Not Enough or Too Much?," Marketing Science, INFORMS, vol. 22(4), pages 503-519, October.
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