41 Pages Posted: 20 Oct 2003 Last revised: 9 Jun 2014
Date Written: February 2009
We estimate the magnitude of consumer search benefits and costs using data obtained from a major Internet shopbot. For the median consumer, the benefits to searching lower screens are $6.55 while the cost of an exhaustive search of the offers is a maximum of $6.45. We are also able to estimate price elasticities and find that they are relatively high compared to offline markets (-7 to -10 in our base model). Our results suggest that consumers face fairly high costs to search for information online, even in the "nearly perfect" market of the shopbot.
Keywords: Search costs, shopbot, product differentiation, random coefficients choice model
Suggested Citation: Suggested Citation
Brynjolfsson, Erik and Dick, Astrid Andrea and Smith, Michael D., A Nearly Perfect Market? (February 2009). Available at SSRN: https://ssrn.com/abstract=450220 or http://dx.doi.org/10.2139/ssrn.450220