Startup Search Costs

20 Pages Posted: 18 Jan 2018  

David P. Byrne

The University of Melbourne

Nicolas de Roos

University of Sydney

Date Written: January 12, 2018

Abstract

Search frictions determine the impacts of policies or technologies in many markets. Workhorse economic models used to study these impacts assume constant marginal search costs: individuals pay the same search cost to become informed about an additional price (sequential search models), or the entire price distribution (non-sequential search models). This paper provides evidence from a natural experiment in retail gasoline on a new form of search costs: startup costs. We empirically document how a temporary, large exogenous shock to consumers' search incentives leads to a permanent doubling of their search intensity for gasoline prices. This result is difficult to explain with a standard search model but follows directly in an otherwise standard search model with a one-time upfront cost to start searching.

Keywords: Search, Price Clearinghouse, Retail Gasoline

JEL Classification: D83, L81

Suggested Citation

Byrne, David P. and de Roos, Nicolas, Startup Search Costs (January 12, 2018). Available at SSRN: https://ssrn.com/abstract=3100395 or http://dx.doi.org/10.2139/ssrn.3100395

David P. Byrne (Contact Author)

The University of Melbourne ( email )

Level 4
111 Barry Street
Melbourne, Victoria 3010
Australia

HOME PAGE: http://https://sites.google.com/view/dprbyrne/

Nicolas De Roos

University of Sydney ( email )

University of Sydney
Sydney NSW 2006, NC
Australia

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