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Sequential search with a price freeze option: theory and experimental evidence

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  • Emanuel Marcu

    (Tilburg University)

  • Charles N. Noussair

    (University of Arizona)

Abstract

We introduce price freeze options into a model of sequential search. The model’s predictions are tested in a laboratory experiment. The experiment varies (1) whether freezing is possible or not, (2) the cost of freezing, and (3) the time horizon. Overall, the observed treatment effects are consistent with the predictions of our model. Assuming that individuals experience regret, fail to ignore sunk search costs, misperceive the number of periods remaining, or are risk-averse, does not improve upon the performance of the model. Our results support the use of the assumption of optimal search behavior in theoretical and empirical studies.

Suggested Citation

  • Emanuel Marcu & Charles N. Noussair, 2024. "Sequential search with a price freeze option: theory and experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 27(5), pages 1106-1139, November.
    • Handle: RePEc:kap:expeco:v:27:y:2024:i:5:d:10.1007_s10683-024-09839-9
    DOI: 10.1007/s10683-024-09839-9
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