Journal article
Startup Search Costs
David Byrne, Nicolas de Roos
American Economic Journal: Microeconomics | American Economic Association | Published : 2022
DOI: 10.1257/mic.20190279
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.
Grants
Funding Acknowledgements
John Asker was coeditor for this article. We thank four anonymous referees for comments that significantly improved the paper. We also thank Robin Lee, Simon Loertscher, Alexander MacKay, George Mailath, Eeva Mauring, Phillip McCalman, Wanda Mimra, Jose Luis Moraga-Gonzalez, Aviv Nevo, Ariel Pakes, Marc Remer, Philipp Schmidt-Dengler, Paul Scott, Matthew Shum, Michelle Sovinsky, Christopher Taber, Tom Wilkening, Nan Yang, and seminar participants from Harvard University, NYU Stern School of Business, Wharton School of the University of Pennsylvania, University of Groningen, University of Vienna, ESMT Berlin, Mines ParisTech, University of Melbourne, University of Adelaide, University of Technology Sydney, 2016 Asia-Pacific IO Conference, 2017 Monash IO Workshop, and 2018 Tinbergen Institute Empirical IO Workshop for helpful comments. Simon Xue -provided excellent research assistance. Financial support from The Samuel and June Hordern Endowment is gratefully acknowledged. All views and any errors or omissions are our own. The authors declare that they have no relevant or material financial interests that relate to the research described in this paper.