Startup Search Costs

31 Pages Posted: 18 Jan 2018 Last revised: 30 Oct 2018

See all articles by David P. Byrne

David P. Byrne

The University of Melbourne

Nicolas de Roos

University of Sydney

Date Written: October 30, 2018

Abstract

Workhorse economic models used for studying the market impacts of search frictions assume constant search costs: individuals pay the same cost to obtain price information each time they search. This paper provides evidence on a new form of search costs: startup costs. Exploiting a natural experiment in retail gasoline, we document how a temporary, large exogenous shock to consumers' search incentives leads to a substantial, permanent increase in price search. A standard search model fails to explain such history-dependence in search, while it follows directly from a model with a one-time up-front cost to start searching.

Keywords: Search, Price Dispersion, Price War, Retail Gasoline

JEL Classification: D83, L81

Suggested Citation

Byrne, David P. and de Roos, Nicolas, Startup Search Costs (October 30, 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://sites.google.com/view/dprbyrne/

Nicolas De Roos

University of Sydney ( email )

University of Sydney
Sydney NSW 2006, NC
Australia

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