Workhorse economic models used for studying the market impacts of search frictions assume constant search costs: individuals pay the same cost to obtain price information each time they search. This paper provides evidence on a new form of search costs: start-up costs. Exploiting a natural experiment in retail gasoline, we document how a temporary, large exogenous shock to consumers' search incentives leads to a substantial, permanent increase in price search. A standard search model fails to explain such history dependence in search, while it follows directly from a model with a one-time up-front cost to start searching.
Byrne, David P., and Nicolas de Roos.
"Start-up Search Costs."
American Economic Journal: Microeconomics,
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Oligopoly and Other Imperfect Markets
Retail and Wholesale Trade; e-Commerce