Three heuristics of search for a low price when initial information about the market is obsolete

Michal Skořepa ()

No 2006/17, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: In traditional economics, buyer behaviour is usually modelled under the assumption of full information either on prices and their locations within the market or at least on the probability distribution of prices in the market. Neither of these assumptions seems appropriate in some cases such as when the buyer enters the specific market only very infrequently (e.g., markets for durables). This paper studies experimentally the search rules that buyers might use in this case of extreme lack of information on prices. The paper identifies three general search heuristics, derives three specific rules from the heuristics and, using data from a small-scale experiment, estimates parameters of the rules.

Keywords: search; heuristics; aspiration level; experiment (search for similar items in EconPapers)
JEL-codes: D12 D83 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-07, Revised 2006-07
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2006_17

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