WHEN DO CONSUMERS SEARCH?

Authors


  • *We thank Robert de Jong, Saul Lach, Huanxing Yang, Lixin Ye, and three anonymous referees for this journal for their comments and suggestions. David Knapp provided outstanding research assistance. All conclusions and/or errors are solely the responsibility of the authors.

Abstract

This paper provides empirical evidence relating search to price movements. We measure consumer search directly from traffic statistics for web sites that report gasoline prices. We show empirically that consumers search more as prices rise than they do when prices fall. Asymmetric search patterns have consequences for price behavior. Our findings indicate that retail margins are squeezed by increased search. In addition, we show that there is more price dispersion when prices are falling than when prices are either stable or rising. Our results provide a search-based explanation for the ‘rockets and feathers’ phenomenon of asymmetric price adjustment.

Ancillary