The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.

Economics of Information

On robust estimation of the location parameter

UNTVERSITY OF CALIFORNIA AT BERKELEY Department of Economics Berkeley, CaHfornia 94720-3880 Working Paper No. 97-251 Psychology and Economics Matthew Rabin Department of Economics University of California, Berkeley January 1997 Key words: bounded rationality, decision making, fairness, framing effects, heuristics and biases, preferences, psychology, reciprocity, reference-dependent utility JEL Classification: A12, B49, D i l , D60, D81, D83, D91 This is a longer version of an essay under preparation for possible publication in the Journal of Economic Literature. I thank John Pencavel and anonymous referees for earlier comments on its structure and content. For comments on this draft, I thank Steven Blatt, Colin Camerer, Peter Diamond, Erik Eyster, Ernst Fehr, Danny Kahneman, George Loewenstein, Ted O'Donoghue, and John Pencavel. For helpful conversations over the past several years on topics covered in this essay, I thank George Akerlof, Gary Chamess, Eddie Dekel, Peter Diamond, David Laibson, David I. Levine, George Loewenstein, Rob MacCoun, James Montgomery, Vai-Lam Mui, Drazen Prelec, and especially Colin Camerer, Danny Kahneman, and Richard Thaler. Co-authors on research related to the topics of this essay include David Bowman, Deborah Minehart, Ted O'Donoghue, and Joel Schrag. Helpful research assistance was provided by Gadi Barlevy, Nikki Blasberg, Gail Brennan, Paul Ellickson, April Franco, Marcus Heng, Bruce Hsu, Jin Woo Jung, and especially Steven Blatt, Jimmy Chan, Erik Eyster, and Clara Wang. I am extremely grateful for financial support from the Russell Sage and Alfred P. Sloan Foundations.

https://www.jstor.org/stable/pdfplus/2564950.pdf

Psychology and Economics

N identical stores compete by choosing prices for a homogeneous good with constant marginal costs. Consumers search sequentially with perfect recall for the lowest price. One class of consumers, called shoppers, have zero search costs, while all other consumers have a positive search cost, c. There is a unique symmetric Nash equilibrium price distribution with the property that it changes smoothly from "marginal cost pricing" when all consumers are shoppers and/or c = 0 and "monopoly pricing" when no consumers are shoppers. Remarkably, as the number of stores increases, the Nash equilibrium becomes more monopolistic. Copyright 1989 by American Economic Association.

Oligopolistic Pricing with Sequential Consumer Search

Preface to the second edition Preface to the original edition Acknowledgments 1. Sex and justice 2. Fairness and commitment 3. Mutual aid 4. Correlated convention 5. The evolution of meaning Postscript Notes References Index.

Evolution of the social contract

https://deepblue.lib.umich.edu/bitstream/handle/2027.42/29198/0000252.pdf;sequence=1

Do People Exploit Their Bargaining Power? An Experimental Study*

This paper considers the wide class of problems in which a searcher can choose his sample size and whether or not to stop search at each of a sequence of decision points. Sequential search problems are the special cases in which the sample size chosen at each decision point is unity. Several properties of the optimal sample size sequence are established, with particular attention being paid to the effects of recall, decision horizons and fallback utilities. These properties yield necessary and sufficient conditions for the optimality of sequential search strategies within the class of problems considered.

/pdf/search-and-optimal-sample-sizes-1jalrcp9w0.pdf

Search and Optimal Sample Sizes

The theoretical literature on the search behavior of workers and consumers typically considers three search strategies. These strategies are characterized by alternative assumptions about the temporal and atemporal intensity of search. The first strategy is an atemporally intensive fixed-sample-size strategy which restricts the agent to collecting exactly one sample of contemporaneous offers but allows him to choose the sample size. The second strategy is a temporally intensive pure-sequential strategy which allows the agent to collect as many samples as he chooses but restricts the size of each to unity. The third strategy is a variable-sample-size strategy, a generalization of the first two which allows the agent to sequentially choose both how many samples to take and the size of each sample. We report an experimental comparison and evaluation of these three search strategies. Copyright 1990 by Royal Economic Society.

/pdf/search-intensity-in-experiments-1ecolc04qv.pdf

Search intensity in experiments

A consumer faces list prices for commodities, but can buy one at a discount. Discounts vary randomly between sellers. The number of quotations sought depends on list prices, search costs and wealth. This function is homogeneous of degree zero, and, provided some sufficient conditions are satisfied, is; increasing in wealth; decreasing in search cost; independent of the list price of the discounted commodity if indirect utility is multiplicatively separable; increasing in the list price if the commodity is a necessity; increasing in the list price of substitutes. Slutsky's equation is generalized to include search.

Search and Consumer Theory

Expected value maximizing sequential search rules can be expressed in terms of reservation values. In search with learning the reservation value at any stage of the search is unknown until that stage is reached. Thus calculating ex ante (and subsequent) probabilities of search duration and the offer accepted is difficult if these probabilities are expressed in terms of reservation values. This paper shows, for a wide class of learning procedures, how re-expressing these probabilities in terms of fixed points allows their direct calculation and, thereby, calculation of the expected value of adaptive search. Examples and comparative statics results are presented.

/pdf/distributions-of-the-duration-and-value-of-job-search-with-4bk2vylen7.pdf

Peter Morgan

Papers

Do People Exploit Their Bargaining Power? An Experimental Study*

Search and Optimal Sample Sizes

Search intensity in experiments

Search and Consumer Theory

Distributions of the Duration and Value of Job Search with Learning