Online Demand Under Limited Consumer Search.

Marketing Science (Impact Factor: 2.36). 01/2010; 29:1001-1023. DOI: 10.2139/ssrn.1340267
Source: DBLP

ABSTRACT Using aggregate product search data from, we jointly estimate consumer information search and online demand for durable goods. To estimate demand and search primitives, we introduce an optimal sequential search process into a model of choice and treat the observed market-level product search data as aggregations of individual-level optimal search sequences. The model builds on the dynamic programming framework by Weitzman (1979) and combines it with a choice model. At the individual level, the model has several attractive properties including closed-form expressions for the probability distribution of alternative search sets and breaking the curse of dimensionality. Using numerical experiments, we verify the model's ability to identify consumer tastes and search cost from product search data. Empirically, the model is applied to the camcorder online market and is used to answer manufacturer questions about market structure and competition, and to address policy maker issues about the effect of recommendation tools on consumer surplus outcomes. We find that consumer search for camcorders is typically limited to about 10 choice options, and that this affects the estimates of own and cross-elasticities. We also find that the vast majority of the households benefit from the's product recommendations via lower search costs.

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    ABSTRACT: We explore how internet browsing behavior varies between mobile phones and personal computers. Smaller screen sizes on mobile phones increase the cost to the user of browsing for information. In addition, a wider range of offline locations for mobile internet usage suggests that local activities are particularly important. Using data on user behavior at a (Twitter-like) microblogging service, we exploit exogenous variation in the ranking mechanism of posts to identify the ranking effects. We show (1) Ranking effects are higher on mobile phones suggesting higher cognitive load: Links that appear at the top of the screen are especially likely to be clicked on mobile phones and (2) The benefit of browsing for geographically close matches is higher on mobile phones: Stores located in close proximity to a user’s home are much more likely to be clicked on mobile phones. Thus, the mobile internet is somewhat less “internet-like”: search costs are higher and distance matters more. We speculate on how these changes may affect the future direction of internet commerce.
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    Thirty Third International Conference on Information Systems (ICIS 2012); 01/2012
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    ABSTRACT: Prices for grocery items differ across stores and time because of promotion periods. Consumers therefore have an incentive to search for the lowest prices. However, when a product is purchased infrequently, the effort to check the price every shopping trip might outweigh the benefit of spending less. I propose a structural model for storable goods that takes into account inventory holdings and search. The model is estimated using data on laundry detergent purchases. I find search costs play a large role in explaining purchase behavior, with consumers unaware of the price of detergent on 70 % of their shopping trips. Therefore, from the retailer’s point of view raising awareness of a promotion through advertising and displays is important. I also find a promotion for a particular product increases the consumer’s incentive to search. This change in incentives leads to an increase in category traffic, which from the store manager’s perspective is a desirable side effect of the promotion.
    Quantitative Marketing and Economics 11/2012; · 1.50 Impact Factor

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