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SSRN Electronic Journal
Article . 2025 . Peer-reviewed
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Dynamic Consumer Search

Authors: Parakhonyak, Alexei; Rhodes, Andrew;

Dynamic Consumer Search

Abstract

We consider a model in which consumers wish to buy a product repeatedly over time, but need to engage in costly search to learn prices and find a product that matches them well. The optimal search rule has two reservation values, one for newly-searched products, and another for products that were searched in the past. Depending on the search cost, firms either keep price steady over time, or gradually raise price to take advantage of a growing pool of high-valuation repeat customers. The model generates rich search and purchase dynamics, as consumers may optimally “stagger” search over time, initially trying different products, settling on one and buying it for a while, before choosing to search again for something better. We also show that consumers may be better off when firms can offer personalized prices based on their search history.

Countries
United Kingdom, France, France
Keywords

330, Repeat purchases, JEL: D - Microeconomics/D.D4 - Market Structure, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, Price dispersion, Turnover, JEL: D - Microeconomics/D.D8 - Information, Firm Strategy, and Design/D.D4.D43 - Oligopoly and Other Forms of Market Imperfection, Knowledge, Consumer search, and Uncertainty/D.D8.D83 - Search • Learning • Information and Knowledge • Communication • Belief • Unawareness, JEL: L - Industrial Organization/L.L1 - Market Structure, B- ECONOMIE ET FINANCE, Pricing, and Market Performance/L.L1.L13 - Oligopoly and Other Imperfect Markets

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
Green
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