Consumer Search on the Internet

Babur De los Santos ()

No 08-15, Working Papers from NET Institute

Abstract: This paper uses consumer search data to explain search frictions in online markets, within the context of an equilibrium search model. I use a novel dataset of consumer online browsing and purchasing behavior, which tracks all consumer search prior to each transaction. Using observed search intensities from the online book industry, I estimate search cost distributions that allow for asymmetric consumer sampling. Research on consumer search often assumes a symmetric sampling rule for analytical convenience despite its lack of realism. Search behavior in the online book industry is quite limited: in only 25 percent of the transactions did consumers visit more than one bookstore's website. The industry is characterized by a strong consumer preference for certain retailers. Accounting for unequal consumer sampling halves the search cost estimates from $1.8 to $0.9 per search in the online book industry. Analysis of time spent online suggests substitution between the time consumers spend searching and the relative opportunity cost of their time. Retired people, those with lower education levels, and minorities (with the exception of Hispanics) spent significantly more time searching for a book online. There is a negative relationship between income levels and time spent searching.

Keywords: search model; non-sequential search; fixed sample search; online markets; book industry (search for similar items in EconPapers)
JEL-codes: D80 D83 L10 L11 L80 L81 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-09, Revised 2008-09
New Economics Papers: this item is included in nep-ict and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Consumer search on the Internet (2018)
Working Paper: Consumer Search on the Internet (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:0815

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