Consumer search theory (1977)
AuthorsMorgan, P. B.show all
This thesis considers several aspects of consumer search theory. The thesis begins by giving a history of developments in consumer search theory since its inception in 1961. Various failings of the literature are discussed and the implications of some of these deficiencies are established, In particular, it is shown that fixed demand restrictions can be incorporated into neo-classical search models only with difficulty, In Chapter 2 an examination of some earlier sequential search models is made. It is found that the restrictions placed on these models are logically inconsistent, except in circumstances which are particularly unusual, A sequential consumer search model, which is not limited by these restrictions, is constructed and compared to the earlier models criticised. Chapter 3 points out that the search literature has largely ignored the problem of a searcher's rational choice of a preferred set of sellers to sample. The effects of marginal financial search costs, transaction costs and information on sellers' behaviour on this choice are described. Some implications of the analysis for advertising strategies are presented, In addition it is shown that, in the circumstances considered, rational choice of search path results in the optimal sequential search strategy being myopic, In Chapter 4 a variety of statistical results are offered. The ex ante probability mass function of sequential search lengths is derived and some comparative statics results established. The ex ante probability density function of minimum observed prices resulting from optimal myopic sequential search is then derived, and its properties are compared to properties which it has previously been inferred to possess, It is found that some of these inferences are not generally valid, The Stigleresque type of consumer search model is substantially extended in Chapter 5 through the use of the indirect utility function. It is shown that the optimal search strategy cannot exclude the consumer's allocation decision 1 as previous analyses have done, and thereby relaxes Stigler's fixed order quantity restriction. Optimal search paths for Stigleresque searchers are described, Comparative statics results are determined which describe the dependence of the quantity of search undertaken on the consumer's wealth, psychic search costs and the nature of the searched-for commodity, In Chapter 6 a generalised search theory is described. This search behaviour is sufficiently general to include both the sequential and Stigleresque search behaviours as special cases. Consequently, the analysis of this chapter resolves the debate over the relative merits of sequential and Stigleresque search rules. Chapter 7 offers some concluding remarks.