Nested search

Yutong Zhang

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arXiv · 2602.03720

Nested search

Yutong Zhang

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Abstract

I introduce and study a nested search problem modeled as a tree structure that generalizes Weitzman (1979) in two ways: (1) search progresses incrementally, reflecting real-life scenarios where agents gradually acquire information about the prizes; and (2) the realization of prizes can be correlated, capturing similarities among them. I derive the optimal policy, which takes the form of an index solution. I apply this result to study monopolistic competition in a market with two stages of product inspection. My application illustrates that regulations on drip pricing lower equilibrium price and raise consumer surplus.

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Yutong Zhang. 2026-02-03. Nested search. https://arxiv.org/abs/2602.03720

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