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You Can Lead a Horse to Water: Spatial Learning and Path Dependence in Consumer Search

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  • Charles Hodgson
  • Gregory Lewis

Abstract

We develop and estimate a model of consumer search with spatial learning. Consumers make inferences from previously searched objects to unsearched objects that are nearby in attribute space, generating path dependence in search sequences. The estimated model rationalizes patterns in data on online consumer search paths: search tends to converge to the chosen product in attribute space, and consumers take larger steps away from rarely purchased products. Eliminating spatial learning reduces consumer welfare by 13%: cross-product inferences allow consumers to locate better products in a shorter time. Spatial learning has important implications for product recommendations on retail platforms. We show that consumer welfare can be reduced by unrepresentative product recommendations and that consumer-optimal product recommendations depend both on consumer learning and competition between platforms.

Suggested Citation

  • Charles Hodgson & Gregory Lewis, 2023. "You Can Lead a Horse to Water: Spatial Learning and Path Dependence in Consumer Search," NBER Working Papers 31697, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31697
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    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L0 - Industrial Organization - - General

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