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Indiana University Bloomington

BEPP

The Kelley Advantage

The department is home to the authors of Managerial Economics and Business Strategy and Games and Information: An Introduction to Game Theory, two of the nation’s leading textbooks in the field.

Research and Publications

Journal Articles

Testing Models of Consumer Search using Data on Web Browsing and Purchasing Behavior

2012, American Economic Review

Babur I. De Los Santos, Matthijs Wildenbeest, Ali Hortaçsu

Abstract

Using a large data set on web browsing and purchasing behavior we test to what extent consumers are searching in accordance to various classical search models. We find that the benchmark model of sequential search with a known distributions of prices can be rejected based on both the recall patterns we observe in the data and the absence of dependence of search decisions on observed prices. Moreover, we show that even if consumers are initially unaware of the price distribution and have to learn the price distribution, observed search behavior for given consumers over time is more consistent with fixed sample size search than sequential search with learning. Our findings suggest fixed sample size search provides a more accurate description of observed consumer search behavior. We then utilize the fixed sample size search model to estimate the price elasticities and profit margins of online book retailers.

Citation

De Los Santos, Babur I., Matthijs Wildenbeest and Ali Hortaçsu (2012), "Testing Models of Consumer Search using Data on Web Browsing and Purchasing Behavior," American Economic Review, 102(6): 2955-80.

Keywords

consumer search, electronic commerce, consumer behavior