Consumer Search and Oligopolistic Pricing: a theoretical and empirical inquiry

In real world markets price information is costly to acquire. This observation has led to an important research program in economics aimed at understanding how firms compete in the presence of consumer search. In spite of the substantial amount of theoretical work on the subject, the attention this issue has received from empirical economists is rather limited. Although existing empirical work shows that market characteristics like consumer search costs, valuations and marginal costs are important in explaining firm pricing behavior in search markets, few papers exist that explicitly try to recover these market characteristics from the data. The recovery of market characteristics is of importance because successful implementation of competition policies requires explicit knowledge of underlying characteristics of the market. The purpose of this thesis is to come up with methods to estimate consumer search models, using a limited amount of data. This thesis is part of a relatively new strain of the consumer search literature that uses the structure of search models to identify and estimate search cost distributions.

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