Publication detail

Three heuristics of search for a low price when initial information about the market is obsolete

Author(s): Mgr. Michal Skořepa Ph.D,
Type: IES Working Papers
Year: 2006
Number: 17
ISSN / ISBN:
Published in: IES WP 2006/17
Publishing place: Prague
Keywords: search, heuristics, aspiration level, experiment
JEL codes: D12, D83
Suggested Citation: Skořepa, M. (2006). “Three heuristics of search for a low price when initial information about the market is obsolete” IES Working Paper 17/2006, IES FSV. Charles University.
Abstract: In traditional economics, buyer behaviour is usually modelled under the assumption of full information either on prices and their locations within the market or at least on the probability distribution of prices in the market. Neither of these assumptions seems appropriate in some cases such as when the buyer enters the specific market only very infrequently (e.g., markets for durables). This paper studies experimentally the search rules that buyers might use in this case of extreme lack of information on prices. The paper identifies three general search heuristics, derives three specific rules from the heuristics and, using data from a small-scale experiment, estimates parameters of the rules.
Downloadable: WP 2006_17_Skorepa

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