UC Berkeley

The dissertation has three chapters. In the first chapter, I estimate consumer search cost with purchase outcome data. I analyze a model where consumers search sequentially for the best option based on advertised price and partial product information. I verify the model's ability to recover the structural parameters by a numerical experiment. Then using Nielsen Consumer Panel Data, I estimate the product-specific search costs for the top five brands in 32oz refrigerated yogurt market. I find that after controlling for the prices, the private label brand has the lowest search cost. Counterfactual analysis shows that eliminating the search cost increases overall purchase and decreases the price sensitivity. Incorrectly ignoring search frictions leads to an overestimation of own-price elasticity.

In the second chapter, we state conditions under which choice data suffices to identify preferences when consumers may not be fully informed about attributes of goods. Our approach can be used to test for full information, to forecast how consumers will respond to information, and to conduct welfare analysis when consumers are imperfectly informed. In a lab experiment, we successfully forecast the response to new information when consumers engage in costly search. In data from Expedia, our method identifies which attribute was not immediately visible to consumers in search results, and we then use the model to compute the value of additional information.

In the third chapter, we study consumers' variety-seeking preferences and explore their implications for targeted marketing using proprietary data from a food delivery platform. We document that a substantial fraction of consumers have variety-seeking preferences. Consumers, on average, are willing to pay 20% more to switch to a different seller. In the counterfactual analysis, we find that optimizing rankings by taking into account variety-seeking preferences increases revenue, consumer welfare, and purchase probability. Furthermore, we find that consumers' variety-seeking preferences soften price competition. Optimal targeted pricing implies an increase in prices for rival sellers' consumers and a decrease in prices for the sellers' own consumers.