This paper builds a consumer search model where the cost of going back to stores already searched is explicitly taken into account. We show that the optimal search rule under costly recall is very different from the optimal search rule under perfect recall. Under costly recall, the optimal search behaviour is nonstationary and, moreover, the reservation price is not independent of previously sampled prices. We fully characterize the optimal search rule under costly recall when a finite number of firms draws price quotes from a given distribution.

costly recall, search
Optimization Techniques; Programming Models; Dynamic Analysis (jel C61), Consumer Economics: Theory (jel D11), Search; Learning; Information and Knowledge (jel D83)
Tinbergen Institute
hdl.handle.net/1765/10896
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
Tinbergen Institute

Janssen, M.C.W, & Parakhonyak, A. (2008). Optimal Search with Costly Recall (No. TI 2008-002/1). Discussion paper / Tinbergen Institute. Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/10896