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Identification in Search Models with Social Information

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Abstract

We theoretically study the problem of a researcher seeking to identify and estimate the search cost distribution when a share of agents in the population observes some peers’ choices. To begin with, we show that social information changes agents’ optimal search and, as a result, the distributions of observable outcomes identifying the search model. Consequently, neglecting social information leads to non-identification of the search cost distribution. Whether, as a result, search frictions are under or overestimated depends on the dataset’s content. Next, we present empirical strategies that restore identification and correct estimation. First, we show how to recover robust bounds on the search cost distribution by imposing only minimal assumptions on agents’ social information. Second, we explore how leveraging additional data or stronger assumptions can help obtain more informative estimates.

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  • Niccolò Lomys & Emanuele Tarantino, 2023. "Identification in Search Models with Social Information," CSEF Working Papers 694, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:694
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    1. Chambers,Christopher P. & Echenique,Federico, 2016. "Revealed Preference Theory," Cambridge Books, Cambridge University Press, number 9781107087804, October.
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    More about this item

    Keywords

    Search & Learning; Social Information; Identification; Networks; Robustness; Partial Identification.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • D1 - Microeconomics - - Household Behavior
    • D6 - Microeconomics - - Welfare Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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