Search on a Grid: Directed Consumer Search with Correlated Products

37 Pages Posted: 15 Apr 2024

See all articles by Jacopo Gambato

Jacopo Gambato

ZEW – Leibniz Centre for European Economic Research; University of Mannheim

Multiple version iconThere are 2 versions of this paper

Date Written: March 26, 2024

Abstract

The consumer search literature mostly considers independently distributed products. In contrast, I study a model of directed search with infinitely many products whose valuations are correlated through shared attributes. I propose a tractable, systematic, history-dependent scoring system based on nests of correlated products that leverages the predictability of the optimal search process along different paths. This scoring system generates an optimal search policy conceptually equivalent to the familiar optimal policy with independently distributed search products. The policy instructs the consumer to inspect unrelated products until an attribute the realization of which surpasses the added informational value of inspecting two new attributes is found. The search paths emerging from this policy match recent evidence of consumer learning through search, and can rationalize backtracking to a previously abandoned attribute.

Keywords: consumer search, directed search, learning

JEL Classification: D83

Suggested Citation

Gambato, Jacopo, Search on a Grid: Directed Consumer Search with Correlated Products (March 26, 2024). Available at SSRN: https://ssrn.com/abstract=4769096 or http://dx.doi.org/10.2139/ssrn.4769096

Jacopo Gambato (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

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