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Consumer Sequential Search: Not Enough or Too Much?

  • Rami Zwick

    ()

    (Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

  • Amnon Rapoport

    ()

    (University of Arizona, Management and Policy, P.O. Box 210108, Tucson, Arizona 85721-0108)

  • Alison King Chung Lo

    ()

    (Duke University, Fuqua School of Business, Durham, North Carolina 27708-0120)

  • A. V. Muthukrishnan

    ()

    (Hong Kong University of Science and Technology, Clear Water Bay, Kowloon Hong Kong)

We study sequential search behavior in a generalized "secretary problem" in which a single object is to be selected from a set ofalternatives. Alternatives are inspected in a random order, one at a time, and only the rank order of the current alternative relative to the ones that have already been observed can be ascertained. At each period, the consumer may either accept the current alternative, continue to search and pay a fixed cost, or recall an alternative that has already been inspected. A recalled alternative is assumed to be available with a known probability. The consumer's goal is to select the overall best alternative from the fixed set. We describe the results of an experiment designed to test the optimal model and compare it to a behavioral decision model that incorporates local patterns of the observed sequence. Both set size and search cost are manipulated experimentally in a 2x2 factorial design. Our results show that cost and set size affect the amount of search in the predicted direction. However, in the two no-cost conditions subjects search too little in comparison to the optimal model, whereas in the two cost conditions they search too much. The behavioral decision rule that we propose provides a possible account for the observed pattern of the behavioral regularities.

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File URL: http://dx.doi.org/10.1287/mksc.22.4.503.24909
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Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 22 (2003)
Issue (Month): 4 (October)
Pages: 503-519

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Handle: RePEc:inm:ormksc:v:22:y:2003:i:4:p:503-519
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  1. Dueker, Michael, 1999. "Conditional Heteroscedasticity in Qualitative Response Models of Time Series: A Gibbs-Sampling Approach to the Bank Prime Rate," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 466-72, October.
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  4. Kogut, Carl A., 1990. "Consumer search behavior and sunk costs," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 381-392, December.
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  6. Goldman, Arieh & Johansson, J K, 1978. " Determinants of Search for Lower Prices: An Empirical Assessment of the Economics of Information Theory," Journal of Consumer Research, Oxford University Press, vol. 5(3), pages 176-86, December.
  7. Kogut, Carl A., 1992. "Recall in consumer search," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 141-151, January.
  8. Joep Sonnemans, 1998. "Decision and Strategies in a Sequential Search Experiment," Tinbergen Institute Discussion Papers 98-032/1, Tinbergen Institute.
  9. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey: Part I," Economic Inquiry, Western Economic Association International, vol. 14(2), pages 155-89, June.
  10. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
  11. Cox, James C & Oaxaca, Ronald L, 1989. "Laboratory Experiments with a Finite-Horizon Job-Search Model," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 301-29, September.
  12. Furse, David H & Punj, Girish N & Stewart, David W, 1984. " A Typology of Individual Search Strategies among Purchasers of New Automobiles," Journal of Consumer Research, Oxford University Press, vol. 10(4), pages 417-31, March.
  13. Schotter, Andrew & Braunstein, Yale M, 1981. "Economic Search: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 19(1), pages 1-25, January.
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