Using Price Distributions to Estimate Search Costs

Han Hong () and Matthew Shum ()
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Han Hong: Duke University

RAND Journal of Economics, 2006, vol. 37, issue 2, pages 257-275

Abstract: We show how the equilibrium restrictions implied by standard search models can be used to estimate search-cost distributions using price data alone. We consider both sequential and nonsequential search strategies, and develop estimation methodologies that exploit equilibrium restrictions to recover estimates of search-cost heterogeneity that are theoretically consistent with the search models. We illustrate the methods using online prices for several economics and statistics textbooks. Ordering information: This article can be ordered from http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=buy&year=2006&issue=sum&page=257&tid=30492&sc=1869P1N9.

Date: 2006
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