Working Paper: CEPR ID: DP15534
Authors: Can Urgun; Leeat Yariv
Abstract: We study a model of retrospective search in which an agent—a researcher, an online shopper, or a politician—tracks the value of a product. Discoveries beget discoveries and their observations are correlated over time, which we model using a Brownian motion. The agent decides both how ambitiously, or broadly, to search, and for how long. We fully characterize the optimal search policy and show that it entails constant scope of search and a simple stopping boundary. We also show the special features that emerge from contracting with a retrospective searcher.
Keywords: retrospective search; drawdown; stopping boundary; contracting
JEL Codes: C61; C73; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| agent's search scope (L85) | expected maximal value of outcomes (C51) |
| observed outcomes (C90) | future search decisions (D87) |
| stopping boundary (F55) | decision to stop searching (J26) |
| prior successes (C52) | expectations for future outcomes (D84) |