Consumer Search on the Internet

Babur De los Santos ()

No 2008-06, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: This paper uses consumer search data to explain search frictions in online markets, within the context of an equilibrium search model. I use a novel dataset of consumer online browsing and purchasing behavior, which tracks all consumer search prior to each transaction. Using observed search intensities from the online book industry, I estimate search cost distributions that allow for asymmetric consumer sampling. Research on consumer search often assumes a symmetric sampling rule for analytical convenience despite its lack of realism. Search behavior in the online book industry is quite limited: in only 25 percen of the transactions did consumers visit more than one bookstore's website. The industry is characterized by a strong consumer preference for certain retailers. Accounting for unequal consumer sampling halves the search cost estimates from 1.8 to 0.9 dollars per search in the online book industry. Analysis of time spent online suggests substitution between the time consumers spend searching and the relative opportunity cost of their time. Retired people, those with lower education levels, and minorities (with the exception of Hispanics) spent significantly more time searching for a book online. There is a negative relationship between income levels and time spent searching.

Keywords: consumer search; internet; search costs (search for similar items in EconPapers)
JEL-codes: C14 D43 D83 L13 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-ict and nep-mkt
References: Add references at CitEc
Citations: View citations in EconPapers (21)

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http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2008-06-delossantos.pdf (application/pdf)

Related works:
Journal Article: Consumer search on the Internet (2018)
Working Paper: Consumer Search on the Internet (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:iuk:wpaper:2008-06

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