Consumer Search on the Internet
This paper uses consumer search data to explain search frictions inonline markets, within the context of an equilibrium search model. I usea novel dataset of consumer online browsing and purchasing behavior,which tracks all consumer search prior to each transaction. Usingobserved search intensities from the online book industry, I estimatesearch cost distributions that allow for asymmetric consumer sampling.Research on consumer search often assumes a symmetric sampling rule foranalytical convenience despite its lack of realism. Search behavior inthe online book industry is quite limited: in only 25 percent of thetransactions did consumers visit more than one bookstore's website. Theindustry is characterized by a strong consumer preference for certainretailers. Accounting for unequal consumer sampling halves the searchcost estimates from $1.8 to $0.9 per search in the online book industry.Analysis of time spent online suggests substitution between the timeconsumers spend searching and the relative opportunity cost of theirtime. Retired people, those with lower education levels, and minorities(with the exception of Hispanics) spent significantly more timesearching for a book online. There is a negative relationship betweenincome levels and time spent searching.
|Year of publication:||
|Authors:||De los Santos, Babur I.|
|Type of publication:||Other|
Net Institute Working Paper;08-15
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