Premium
Using price distributions to estimate search costs
Author(s) -
Hong Han,
Shum Matthew
Publication year - 2006
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/j.1756-2171.2006.tb00015.x
Subject(s) - exploit , search cost , econometrics , computer science , economics , linear search , mathematical optimization , mathematics , microeconomics , algorithm , computer security
We show how the equilibrium restrictions implied by standard search models can be used to estimate search‐cost distributions using price data alone. We consider both sequential and non‐sequential search strategies, and develop estimation methodologies that exploit equilibrium restrictions to recover estimates of search‐cost heterogeneity that are theoretically consistent with the search models. We illustrate the method using online prices for several economics and statistics textbooks .