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Testing Models of Consumer Search Using Data on Web Browsing Behavior

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Abstract

Using a large data set on consumers' web browsing and purchasing behavior we contrast various classical search models. We find that the benchmark model of sequential search with a known distributions of prices can be rejected based on the recall patterns we observe in the data. Moreover, we show that even if consumers are initially unaware of the price distribution and have to learn the price distribution, observed search behavior for given consumers over time is more consistent with non-sequential search than sequential search with learning. Our findings suggest non-sequential search provides a more accurate description of observed consumer search behavior. We then utilize the non-sequential search model to estimate the price elasticities and markups of online book retailers.

Suggested Citation

  • Babur De los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2009. "Testing Models of Consumer Search Using Data on Web Browsing Behavior," Working Papers 09-23, NET Institute, revised Aug 2009.
    • Handle: RePEc:net:wpaper:0923
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    Cited by:

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    2. Sergei Koulayev, 2009. "Estimating demand in search markets: the case of online hotel bookings," Working Papers 09-16, Federal Reserve Bank of Boston.

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    More about this item

    Keywords

    search costs; sequential search; fixed-sample search; non-sequential search; online browsing; online book industry; consumer search;
    All these keywords.

    JEL classification:

    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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