Costly search and consideration sets in storable goods markets

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• 作者：Tiago Pires
• 关键词：Search costs ; Consideration set ; Information ; Storable goods ; Dynamic discrete ; choice models
• 刊名：Quantitative Marketing and Economics
• 出版年：2016
• 出版时间：September 2016
• 年：2016
• 卷：14
• 期：3
• 页码：157-193
• 全文大小：515 KB
• 刊物类别：Business and Economics
• 刊物主题：Economics
  Marketing
  Economic Theory
  Statistics for Business, Economics, Mathematical Finance and Insurance
  
• 出版者：Springer Netherlands
• ISSN：1573-711X
• 卷排序：14

文摘

Costly search can result in consumers restricting their attention to a subset of products–the consideration set–before making a final purchase decision. The search process is usually not observed, which creates econometric challenges. I show that inventory and the availability of different package sizes create new sources of variation to identify search costs in storable goods markets. To evaluate the importance of costly search in these markets, I estimate a dynamic choice model with search frictions using data on purchases of laundry detergent. My estimates show that consumers incur significant search costs, and ignoring costly search overestimates the own-price elasticity for products more often present in consideration sets and underestimates the elasticity of frequently excluded products. Firms employ marketing devices, such as product displays and advertising, to influence consideration sets. These devices have direct and strategic effects, which I explore using the estimates of the model. I find that using marketing devices to reduce a product’s search cost during a price promotion has modest effects on the overall category revenues, and decreases the revenues of some products.