When Do Consumers Search?
27 Pages Posted: 29 Sep 2011
Date Written: September 2011
This paper provides empirical evidence relating search to price movements. We measure consumer search directly from traffic statistics for web sites that report gasoline prices. We show empirically that consumers search more as prices rise than they do when prices fall. Asymmetric search patterns have consequences for price behavior. Our findings indicate that retail margins are squeezed by increased search. In addition, we show that there is more price dispersion when prices are falling than when prices are either stable or rising. Our results provide a search‐based explanation for the ‘rockets and feathers’ phenomenon of asymmetric price adjustment.
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