Feature | 09/24/2018

Dan Savelle Presents at EARIE'S Rising Stars Session

Dan Savelle presented his paper, “Discrete Choices with (and without) Ordered Search,” at the 45th Annual Conference of the European Association for Research in Industrial Economics (EARIE) in a Rising Stars Session in Athens, Greece. The Conference consisted of contributed and invited sessions across various IO topics including Search, Platform Economics, Advertising, Auctions, Mechanism Design, Trade and IO, and Financial Markets, with keynote talks by Jakub Kastl, Peter Neary and Xavier Vives. Dan's paper relates two literatures in the field of Industrial Organization, ordered search and classic discrete choice. In IO, the selection choices of a consumer, such as a family looking to buy a house, are often represented by the classic discrete-choice model of decision making, which posits a consumer who receives a match value for each option and selects the option with the highest match value. However, in many markets, consumers may not know their values without first incurring a cost. For example, the family searching for a home incurs costs in terms of time and effort. In this context, the consumer starts with information that can be updated through some costly process like ordered search, a discrete choice model where a consumer selects from a set of products after paying a search cost to learn each product's actual value. Dan proves that in situations where consumers correctly anticipate the choices of firms (e.g prices), ordered search and classic discrete-choice are equivalent models for describing the selections of consumers.