Optimal Search and Discovery

Rafael P. Greminger

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arXiv · 1911.07773

Optimal Search and Discovery

Rafael P. Greminger

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Abstract

This paper studies a search problem where a consumer is initially aware of only a few products. At every point in time, the consumer then decides between searching among alternatives he is already aware of and discovering more products. I show that the optimal policy for this search and discovery problem is fully characterized by tractable reservation values. Moreover, I prove that a predetermined index fully specifies the purchase decision of a consumer following the optimal search policy. Finally, a comparison highlights differences to classical random and directed search.

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econ.TH econ.GN q-fin.EC

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Rafael P. Greminger. 2019-11-18. Optimal Search and Discovery. https://arxiv.org/abs/1911.07773

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