Using price distributions to estimate search costs

In: The Rand journal of economics, Band 37, Heft 2, S. 257-275

Abstract

We show how the equilibrium restrictions implied by standard search models can be used to estimate search‐cost distributions using price data alone. We consider both sequential and non‐sequential search strategies, and develop estimation methodologies that exploit equilibrium restrictions to recover estimates of search‐cost heterogeneity that are theoretically consistent with the search models. We illustrate the method using online prices for several economics and statistics textbooks.