Time Costs and Search Behavior
Munich Personal RePEc Archive Time Costs and Search Behavior Hsiao, Yu-Chin and Kemp, Simon and Servátka, Maroš and Ward, Matt and Zhang, Le University of Canterbury, MGSM Experimental Economics Laboratory, Macquarie Business School, University of Economics in Bratislava 19 January 2021 Online at https://mpra.ub.uni-muenchen.de/105412/ MPRA Paper No. 105412, posted 02 Feb 2021 04:44 UTC Time Costs and Search Behavior Yu-Chin Hsiao University of Canterbury & MGSM Experimental Economics Laboratory, Macquarie Business School & Lingnan University Simon Kemp University of Canterbury Maroš Servátka MGSM Experimental Economics Laboratory, Macquarie Business School & University of Economics in Bratislava Matt Ward University of Canterbury Le Zhang MGSM Experimental Economics Laboratory, Macquarie Business School January 19, 2021 Abstract: Sequential search is often costly and time-consuming. The time cost is usually unknown ex ante and its presence and duration must be inferred as the search progresses. We disentangle the effect of time cost on search behavior from people’s (in)ability to perceive time delay between offers. We find that people are able to infer the existence of the time cost, but their inference is imperfect. We also compare the effect of time cost with the effect of monetary cost and find that the time cost reduces the amount of exerted search, but not as much as the monetary cost does. Discriminating between the effects is critical for increasing the empirical validity of search models and designing mechanisms capable of improving the quality of decisions, especially in unfamiliar or infrequently encountered situations. Keywords: Sequential Search, Time Cost, Search Cost, Experiment JEL Classification: C6, C91, D83 Acknowledgements: This paper is based on Yu-Chin Hsiao’s dissertation written jointly at the University of Canterbury and Macquarie Graduate School of Management (Hsiao, 2018).
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