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It is well known that search costs and switching costs can create market power by constraining the ability of consumers to change suppliers. While previous research has examined each cost in isolation, this paper demonstrates the ...
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It is well known that search costs and switching costs can create market power by constraining the ability of consumers to change suppliers. While previous research has examined each cost in isolation, this paper demonstrates the benefits of examiningthe two types of friction in unison. The paper shows how subtle distinctions between the two costs can provide important differences in their effects upon consumer behaviour, competition and welfare. In addition, the paper also illustrates a simple empirical methodology for estimating separate measures of both costs, while demonstrating a potential bias that can arise if only one cost is considered.
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This paper demonstrates the incentives for an oligopolist to obfuscate by deliberately increasing the cost with which consumers can locate its product and price. Consumers are allowed to choose the optimal order in which to search...
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This paper demonstrates the incentives for an oligopolist to obfuscate by deliberately increasing the cost with which consumers can locate its product and price. Consumers are allowed to choose the optimal order in which to search firms and firms are able to influence this order through their choice of search costs and prices. Competition does not ensure market transparency - equilibrium search costs are positive and asymmetric across firms. Intuitively, an obfuscating firm can soften the competition for consumers with low time costs by inducing the remaining consumers to optimally first search its rival.
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This paper analyzes how search costs affect skilled-unskilled wage inequality. In the basic model, we find that an increase in skilled labor's search costs will decrease wage inequality if the skilled labor market and the unskille...
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This paper analyzes how search costs affect skilled-unskilled wage inequality. In the basic model, we find that an increase in skilled labor's search costs will decrease wage inequality if the skilled labor market and the unskilled labor market are separated. In the extended model, our findings are as follows: (i) Even if there exists free entry into the unskilled labor market or the endogenous provision of public goods, an increase of search costs in the skilled labor market will decrease wage inequality; and (ii) if skilled search costs are negatively related to the skilled wage, wage inequality will be increased.
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We extend Stahl's (1989) model to a setting with differentiated products to study the effects of price-directed consumer search. Consumers engage in costly search to find out whether products meet their needs. Consumer search is d...
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We extend Stahl's (1989) model to a setting with differentiated products to study the effects of price-directed consumer search. Consumers engage in costly search to find out whether products meet their needs. Consumer search is directed by prices when they are observable before search, in contrast to the case in which prices are discovered only after search, where search is naturally random. The equilibrium under price-directed search differs substantially from that under random search, despite certain similarities. We show that as search costs decrease, sales become more likely and firms earn higher expected profits under price-directed search, whereas the opposite holds under random search. Moreover, compared with random search, under price-directed search firms, expected profits are always lower, but consumer surplus and total welfare are higher provided that the search cost is sufficiently small. (C) 2018 Elsevier B.V. All rights reserved.
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We demonstrate that regulations that lower consumer search costs and make them less heterogeneous across consumers can lead to higher prices charged by firms. We estimate the distribution of consumer search costs for 366 isolated ...
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We demonstrate that regulations that lower consumer search costs and make them less heterogeneous across consumers can lead to higher prices charged by firms. We estimate the distribution of consumer search costs for 366 isolated retail gasoline markets, and find that reducing the mean and standard deviation by 20% and 48%, respectively, leads to price increases in 32% of markets and an average price increase of 5.2 cents per gallon across all markets. Thus, price transparency regulation that results in higher prices may not stem from collusion, but from an equilibrium with less consumer search. (C) 2017 Elsevier B.V. All rights reserved.
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We provide a design for a low cost orientable search coil that can be used to investigate the variation of magnetic flux with angle. This experiment is one of the required practical activities in the current A level physics specif...
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We provide a design for a low cost orientable search coil that can be used to investigate the variation of magnetic flux with angle. This experiment is one of the required practical activities in the current A level physics specification for the AQA examination board in the UK. We demonstrate its performance and suggest other suitable investigations that can be undertaken.
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This article investigates whether search costs inhibit consumers from searching for lower credit card interest rates. The results provide evidence that the credit card search environment has changed since the mid-1990s. Using the ...
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This article investigates whether search costs inhibit consumers from searching for lower credit card interest rates. The results provide evidence that the credit card search environment has changed since the mid-1990s. Using the 2001 Survey of Consumer Finances, we model consumers' propensity to search and their probability of being denied credit simultaneously and find that larger credit card balances induce cardholders to search more even though they face a higher probability of rejection. This result may be related to the high volume of direct solicitation, combined with disclosure requirements, which has lowered the cost of search to find lower interest rates.
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A searcher starting from a given node in a connected network can move along the edges and, when at a node can (but does not have to) search that node; moving on an edge involves a travelling cost and searching a node involves a se...
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A searcher starting from a given node in a connected network can move along the edges and, when at a node can (but does not have to) search that node; moving on an edge involves a travelling cost and searching a node involves a search cost. The searcher wants to find an immobile object located at one of the nodes other than the searcher's starting node and, for each node, knows the probability that it is located there. The object is found if and only if the searcher is at the node where the object is hidden and searches there. How can the searcher find the object at minimum cost? We analyze this problem when the network is complete bipartite, where the set of nodes is partitioned to two.
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Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration...
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Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration using German establishment data. An instrumental variable estimation shows no relation between search duration and search costs. We conclude that search costs are mainly fixed costs. Furthermore, we show that a search and matching model, calibrated for Germany with fixed costs close to 75%, can generate labor market volatility that is consistent with the data.
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Firms simultaneously set prices in a homogeneous-product market where uninformed consumers search for price information. Some uninformed consumers are "local" searchers who visit only one seller, whereas others search sequentially...
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Firms simultaneously set prices in a homogeneous-product market where uninformed consumers search for price information. Some uninformed consumers are "local" searchers who visit only one seller, whereas others search sequentially with an optimal reservation price. Equilibrium prices may follow a mixture distribution, with clusters of high and low prices separated by a zero-density gap. When the (exogenous) reservation price of local searchers depart from that of the optimizing sequential searchers by a relatively small amount, the presence of local searchers either has no effect on market outcomes or benefits all consumers. A reduction in search cost sometimes leads to higher equilibrium prices.
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