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Optimal Search and Discovery

Author

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  • Rafael P. Greminger

    (Department of Econometrics & Operations Research, Tilburg University, Tilburg 5000 LE, Netherlands)

Abstract

This paper studies a search problem in which a consumer is initially aware of only a few products. At every point in time, the consumer then decides between searching among alternatives of which he is already aware and discovering more products. I show that the optimal policy for this search and discovery problem is fully characterized by tractable reservation values. Moreover, I prove that a predetermined index fully specifies the purchase decision of a consumer following the optimal search policy. Finally, a comparison highlights differences to classical random and directed search.

Suggested Citation

  • Rafael P. Greminger, 2022. "Optimal Search and Discovery," Management Science, INFORMS, vol. 68(5), pages 3904-3924, May.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:5:p:3904-3924
    DOI: 10.1287/mnsc.2021.4085
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    References listed on IDEAS

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    Cited by:

    1. Gibbard, Peter, 2023. "Search with two stages of information acquisition: A structural econometric model of online purchases," Information Economics and Policy, Elsevier, vol. 65(C).
    2. Rafael P. Greminger, 2022. "Heterogeneous Position Effects and the Power of Rankings," Papers 2210.16408, arXiv.org, revised Dec 2023.
    3. Ilya Morozov & Anna Tuchman, 2024. "Where Does Advertising Content Lead You? We Created a Bookstore to Find Out," Marketing Science, INFORMS, vol. 43(5), pages 986-1001, September.

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