Start-up Search Costs

David P. Byrne and Nicolas de Roos

American Economic Journal: Microeconomics, 2022, vol. 14, issue 2, 81-112

Abstract: Workhorse economic models used for studying the market impacts of search frictions assume constant search costs: individuals pay the same cost to obtain price information each time they search. This paper provides evidence on a new form of search costs: start-up costs. Exploiting a natural experiment in retail gasoline, we document how a temporary, large exogenous shock to consumers' search incentives leads to a substantial, permanent increase in price search. A standard search model fails to explain such history dependence in search, while it follows directly from a model with a one-time up-front cost to start searching.

JEL-codes: D83 L13 L81 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/mic.20190279

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