Working Paper: NBER ID: w31697
Authors: Charles Hodgson; Gregory Lewis
Abstract: We develop and estimate a model of consumer search with spatial learning. Consumers make inferences from previously searched objects to unsearched objects that are nearby in attribute space, generating path dependence in search sequences. The estimated model rationalizes patterns in data on online consumer search paths: search tends to converge to the chosen product in attribute space, and consumers take larger steps away from rarely purchased products. Eliminating spatial learning reduces consumer welfare by 13%: cross-product inferences allow consumers to locate better products in a shorter time. Spatial learning has important implications for product recommendations on retail platforms. We show that consumer welfare can be reduced by unrepresentative product recommendations and that consumer-optimal product recommendations depend both on consumer learning and competition between platforms.
Keywords: No keywords provided
JEL Codes: D80; D83; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Searched Product Utility (X) (L81) | Inference about Unsearched Product Utility (Y) (D11) |
| Searched Product Utility (X) (L81) | Path Dependence in Search (Z) (D83) |
| Spatial Learning (R32) | Consumer Welfare (D69) |
| Spatial Learning (R32) | Efficiency of Consumer Search (D12) |