Simulating Sequential Search Models with Genetic Algorithms: Analysis of Price Ceilings, Taxes, Advertising and Welfare

McCarthy, I. 2009. “Simulating Sequential Search Models with Genetic Algorithms: Analysis of Price Ceilings, Taxes, Advertising and Welfare,” Journal of Computational Economics 34(3):217-241.

29 Pages Posted: 30 Apr 2008 Last revised: 12 Feb 2015

Ian M. McCarthy

Emory University - Department of Economics

Date Written: April 30, 2008

Abstract

This paper studies advertising, price ceilings and taxes in a sequential search model with bilateral heterogeneities in production and search costs. We estimate equilibria using a genetic algorithm (GA) applied to over 100 market scenarios, each differing based on the number of firms, number of consumers, existence of price ceilings or taxes, costs of production, costs of advertising, consumers' susceptibility to advertising and consumers' search costs. We compare our equilibrium results to those of the standard theoretical consumer search literature and analyze the welfare effects of advertising, price ceilings and sales taxes. We find that price ceilings and uninformative advertising can improve welfare, especially if search costs are sufficiently high.

JEL Classification: C63, D21, D43, D73, D83, M37

Suggested Citation

McCarthy, Ian M., Simulating Sequential Search Models with Genetic Algorithms: Analysis of Price Ceilings, Taxes, Advertising and Welfare (April 30, 2008). McCarthy, I. 2009. “Simulating Sequential Search Models with Genetic Algorithms: Analysis of Price Ceilings, Taxes, Advertising and Welfare,” Journal of Computational Economics 34(3):217-241. . Available at SSRN: https://ssrn.com/abstract=1127296 or http://dx.doi.org/10.2139/ssrn.1127296

Ian M. McCarthy (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

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