Abstract

http://ssrn.com/abstract=2345449
 


 



Simultaneous or Sequential? Search Strategies in the U.S. Auto Insurance Industry


Elisabeth Honka


UCLA Anderson School of Management

Pradeep K. Chintagunta


University of Chicago

February 3, 2016


Abstract:     
We study the identification of the search method consumers use when resolving uncertainty in the prices of alternatives. We show that the search method -- simultaneous or sequential -- is identified with data on consumers' consideration sets (but not the sequence of searches), prices for the considered alternatives and market-wide price distributions are observed. We show that identification comes from differences in the patterns of actual prices in consumers' consideration sets across search methods. We also provide a new estimation approach for the sequential search model that uses such data. Using data on consumer shopping behavior in the U.S. auto insurance industry that contains information on consideration sets and choices, we find that the pattern of actual prices in consumers' consideration sets is consistent with consumers searching simultaneously. Via counterfactuals we show that the consideration set and purchase market shares of the largest insurance companies are overpredicted under the incorrect assumption of sequential search. As the search method affects consumers' consideration sets, which in turn influence brand choices, understanding the nature of consumer search and its implications for consideration and choice is important from a managerial perspective.

Number of Pages in PDF File: 79

Keywords: Consumer Search, Simultaneous Search, Sequential Search, Auto Insurance

JEL Classification: D43, D83, L13


Open PDF in Browser Download This Paper

Date posted: October 27, 2013 ; Last revised: February 4, 2016

Suggested Citation

Honka, Elisabeth and Chintagunta, Pradeep K., Simultaneous or Sequential? Search Strategies in the U.S. Auto Insurance Industry (February 3, 2016). Available at SSRN: http://ssrn.com/abstract=2345449 or http://dx.doi.org/10.2139/ssrn.2345449

Contact Information

Elisabeth Honka (Contact Author)
UCLA Anderson School of Management ( email )
Los Angeles, CA
United States
Pradeep K. Chintagunta
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

Chicago Booth School of Business Logo

Feedback to SSRN


Paper statistics
Abstract Views: 1,474
Downloads: 418
Download Rank: 51,021

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.203 seconds