You Can Lead a Horse to Water: Spatial Learning and Path Dependence in Consumer Search

Charles Hodgson and Gregory Lewis

No 31697, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop and estimate a model of consumer search with spatial learning. Consumers make inferences from previously searched objects to unsearched objects that are nearby in attribute space, generating path dependence in search sequences. The estimated model rationalizes patterns in data on online consumer search paths: search tends to converge to the chosen product in attribute space, and consumers take larger steps away from rarely purchased products. Eliminating spatial learning reduces consumer welfare by 13%: cross-product inferences allow consumers to locate better products in a shorter time. Spatial learning has important implications for product recommendations on retail platforms. We show that consumer welfare can be reduced by unrepresentative product recommendations and that consumer-optimal product recommendations depend both on consumer learning and competition between platforms.

JEL-codes: D80 D83 L0 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-com and nep-ure
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Citations: View citations in EconPapers (2)

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