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Search for differentiated products: identification and estimation
Author(s) -
Koulayev Sergei
Publication year - 2014
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12062
Subject(s) - search cost , endogeneity , clickstream , identification (biology) , econometrics , computer science , price elasticity of demand , search algorithm , set (abstract data type) , linear search , economics , pattern search , product (mathematics) , product differentiation , mathematical optimization , microeconomics , mathematics , algorithm , botany , geometry , cournot competition , world wide web , web api , web modeling , web service , programming language , biology
When consumers search for differentiated products, a given search decision can be explained either by low search cost or by low tastes for the set of products already found. We propose an identification strategy that allows to estimate the search cost distribution in the presence of unobserved tastes. The required data takes the form of conditional search decisions: observations of search actions combined with previously observed product displays. We develop an application using clickstream data from a hotel search platform. Estimates of price elasticity of demand in the search model differ from those in the static model, reflecting the bias due to endogeneity of search‐generated choice sets.