Start-up Search Costs
American Economic Journal: Microeconomics
vol. 14,
no. 2, May 2022
(pp. 81-112)
Abstract
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.Citation
Byrne, David P., and Nicolas de Roos. 2022. "Start-up Search Costs." American Economic Journal: Microeconomics, 14 (2): 81-112. DOI: 10.1257/mic.20190279Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L13 Oligopoly and Other Imperfect Markets
- L81 Retail and Wholesale Trade; e-Commerce
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