John's headed to the Southern Economic Association meetings in San Antonio this weekend. Unfortunately I can't make it. At the risk of exposing her to John's typcial meeting antics, I'm sending one of my brilliant Ph.D. students, Carolina Castilla*, in my place. She'll be presenting some work we're doing on consumers' price search strategies. Here's the abstract for Consumer Willingness to Search in the Gasoline Retail Market...
Abstract:
Price search enables consumers to overcome information asymmetries, it can lead to a reduction in price dispersion and it can increase consumer surplus. But, search is costly and we know very little about how the cost of search enters the consumer’s search decision. In the case of the market for gasoline, the cost of search is a function of the amount of gasoline consumed and the time spent searching for the lowest price. In this paper we conduct an internet survey among a random sample of 480 drivers in the State of Ohio to answer two main questions: when do consumers search, and are consumers considering search costs as sunk. We use a choice experiment on willingness to search to answer these questions. Though, it can be argued that consumers incorporate some search as a sunk cost in their current optimization decision because they have incurred some of that cost in the past, we find that this is not the case. When faced with prices above their expectations, consumers incorporate both gasoline and time costs into their search decision, whereas when faced with prices below their expectations the driving factor on consumers’ willingness to search is the difference between posted and expected price.
*And yes, Carolina will be on the job market next year, so if you are in the market for a well-trained economist with a humble advisor, give her a call.
