NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Discounts and Deadlines in Consumer Search

Dominic Coey, Bradley Larsen, Brennan Platt

NBER Working Paper No. 22038
Issued in February 2016, Revised in September 2019
NBER Program(s):The Industrial Organization Program, Technical Working Papers

We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, eventually turning to full-price sellers. The model predicts equilibrium price dispersion and rationalizes discount and full-price sellers coexisting without relying on ex-ante heterogeneity. We apply the model to online retail sales via auctions and posted prices, where failed attempts to purchase a good reveal consumers' reservation prices. We find robust evidence supporting the theory, and demonstrate that ignoring buyer deadlines can distort estimates of market welfare, consumer demand, and underlying causes of market shifts.

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Document Object Identifier (DOI): 10.3386/w22038

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