Startup Search Costs
-
David P. Byrne
-
Nicolas de Roos
- American Economic Journal: Microeconomics (Forthcoming)
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: startup 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.
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