SEMI-NONPARAMETRIC ESTIMATION OF CONSUMER SEARCH COSTS

Authors

  • José Luis Moraga-González,

    1. Faculty of Economics and Business Administration, VU University, Amsterdam, The Netherlands
    2. Faculty of Economics and Business, University of Groningen, The Netherlands
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  • Zsolt Sándor,

    Corresponding author
    1. Faculty of Economic and Human Sciences, Sapientia University, Miercurea Ciuc, Romania
    • Correspondence to: Zsolt Sándor, Faculty of Economic and Human Sciences, Sapientia University, Miercurea Ciuc, Romania. E-mail: zsosan@gmail.com

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  • Matthijs R. Wildenbeest

    1. Kelley School of Business, Indiana University, Bloomington, IN, USA
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SUMMARY

This paper studies the estimation of the distribution of non-sequential search costs. We show that the search cost distribution is identified by combining data from multiple markets with common search technology but varying consumer valuations, firms' costs, and numbers of competitors. To exploit such data optimally, we provide a new method based on semi-nonparametric estimation. We apply our method to a dataset of online prices for memory chips and find that the search cost density is essentially bimodal, such that a large fraction of consumers searches very little, whereas a smaller fraction searches a relatively large number of stores. Copyright © 2012 John Wiley & Sons, Ltd.

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