An Experiment to Investigate the Externalities of Search

Louise Allsopp

The Economic Record, 2004, vol. 80, issue 251, 423-435

Abstract: This paper presents an experiment to investigate the impact of information externalities in a search model. The model implies that information spillovers create an initial delay in action by agents, followed by a flurry of activity once some public information is revealed. Conversely, this experiment reveals a shorter delay prior to the first subject moving than the model suggests. Furthermore, the subsequent increase in activity is greater than predicted. However, as the sessions progress, the subjects exhibit a degree of learning in each treatment. They prolong their search for higher payouts and, hence, their behaviour approaches that of the model's optimal strategy.

Date: 2004
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https://doi.org/10.1111/j.1475-4932.2004.00199.x

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