Optimal Search and Awareness Expansion

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Abstract

This paper introduces a search problem where a consumer has to first become aware of an alternative, before being able to search it. Initially, the consumer is aware of only a few alternatives. During search, the consumer sequentially decides between searching alternatives he is already aware of and expanding awareness to discover more products. I show that the optimal policy for this search problem is fully characterized by simple reservation values. Moreover, I prove that the purchase outcome of a consumer optimally solving the search problem is equivalent to the consumer simply choosing the product offering the largest value on a predetermined index.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages35
Volume2019-034
Publication statusPublished - 19 Nov 2019

Publication series

NameCentER Discussion Paper
Volume2019-034

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Keywords

  • sequential search
  • limited awareness
  • information aquisition

Cite this

Greminger, R. (2019). Optimal Search and Awareness Expansion. (CentER Discussion Paper; Vol. 2019-034). CentER, Center for Economic Research.