Journal article

Startup Search Costs

David Byrne, Nicolas de Roos

American Economic Journal: Microeconomics | American Economic Association | Published : 2021

Abstract

Workhorse economic models used for studying the market impacts of search frictions assume constant search costs: individuals pay the same cost to obtain price information each time they search. This paper provides evidence on a new form of search costs: startup costs. Exploiting a natural experiment in retail gasoline, we document how a temporary, large exogenous shock to consumers' search incentives leads to a substantial, permanent increase in price search. A standard search model fails to explain such history-dependence in search, while it follows directly from a model with a one-time up-front cost to start searching.

University of Melbourne Researchers

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