Search with Learning
This 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.
|Date of creation:||Aug 2012|
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Web page: http://kelley.iu.edu/bepp/
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- Babur De los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2009.
"Testing Models of Consumer Search using Data on Web Browsing and Purchasing Behavior,"
2009-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Babur De Los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2012. "Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior," American Economic Review, American Economic Association, vol. 102(6), pages 2955-80, October.
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"Optimal search with learning,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 20(1-3), pages 333-359.
- Matthijs R Wildenbeest, 2009.
"An Empirical Model of Search with Vertically Differentiated Products,"
2009-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Matthijs R. Wildenbeest, 2011. "An empirical model of search with vertically differentiated products," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 729-757, December.
- 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.
- Babur De los Santos, 2008.
"Consumer Search on the Internet,"
08-15, NET Institute, revised Sep 2008.
- Gabriel Talmain & Chien-Fu Chou, 1990. "Non-Parametric Search," Discussion Papers 92-01, University at Albany, SUNY, Department of Economics.
- Philip A. Haile & Han Hong & Matthew Shum, 2003.
"Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions,"
Cowles Foundation Discussion Papers
1445, Cowles Foundation for Research in Economics, Yale University.
- Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values at First-Price Sealed-Bid Auctions," NBER Working Papers 10105, National Bureau of Economic Research, Inc.
- Philip A. Haile & Han Hong & Matthew Shum, 2004. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Working Papers 2004.149, Fondazione Eni Enrico Mattei.
- Sergei Koulayev, 2009. "Estimating demand in search markets: the case of online hotel bookings," Working Papers 09-16, Federal Reserve Bank of Boston.
- repec:dgr:uvatin:20060019 is not listed on IDEAS
- repec:rje:randje:v:37:y:2006:2:p:257-275 is not listed on IDEAS
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