published in: Review of Economic Studies, 2019, 86 (3), 1258-1300.
We analyse consumers' search and purchase decisions on an Internet platform. Using a rich dataset on all adverts posted and transactions made on a major French Internet platform (PriceMinister), we show evidence of substantial price dispersion among adverts for the same product. We also show that consumers do not necessarily choose the cheapest advert available and sometimes even choose an advert that is dominated in price and non-price characteristics (such as seller's reputation) by another available advert.
To explain the transactions observed on the platform, we derive and estimate a structural model of sequential directed search where consumers observe all advert prices but have to pay a search cost to see the other advert characteristics. We allow for flexible heterogeneity in consumers' preferences and search costs. After deriving tractable identification conditions for our model, we estimate sets of parameters that can rationalize each transaction. Our model can predict a wide range of consumer search strategies and fits almost all transactions observed in our sample. We find empirical evidence of heterogenous, sometimes positive and substantially large search costs and marginal willingness to pay for advert hedonic characteristics.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.