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Search Search and Economics Search is ubiquitous Money as a search efficiency Eliminates double coincidence of wants in search for barter exchange Job search Matching of individual abilities with firm labor needs Product search and shopping Price dispersion and location

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PowerPoint Slideshow about 'Search' - oshin


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search and economics
Search and Economics
  • Search is ubiquitous
    • Money as a search efficiency
      • Eliminates double coincidence of wants in search for barter exchange
    • Job search
      • Matching of individual abilities with firm labor needs
    • Product search and shopping
      • Price dispersion and location
    • Research and development as a search activity
      • Proprietary versus open source
search costs
Search Costs
  • Sequential search
    • At each step of the search process, the consumer incurs an additional search cost (general in terms of disutility of time spent searching)
    • Given this cost, consumer must decide whether to purchase at the price quoted by the store, or whether to continue searching, incurring the search cost

Store #1

Store #2

Purchase

Purchase

No

Info Gathering

Info Gathering

Yes

Yes

search costs4
Search Costs
  • Example
    • Alice faces search costs of $1 to travel to each store
    • At store #1, Alice is quoted the price of $10 for a blouse
      • If she purchases from store #1, her total cost (including the search cost) is $11
    • Suppose Alice decides not to purchase and instead goes to store #2.
    • At store #2, she is quoted a price of $9.50 for the same blouse
      • If she purchases the blouse here, her total cost will be $11.50 (since she incurs total search costs of $2 -- $1 to visit the first store and $1 to visit the second store).
search costs5
Search Costs
  • Issue of repeated versus one-time purchases
    • Market with continual inflow of new, uninformed buyers, will lead to prices at the monopoly level
    • Market in which buyers visit firms repeatedly lead to reduced search costs as buyers learn about individual stores’ pricing practices
    • Explains why prices at “tourist traps” are significantly higher than in markets which serve regular customers
  • Location issues
    • In a linear market, stores near the parking lot can charge higher prices by virtue of their location
search costs6
Search Costs
  • Simultaneous search

Store #1

Info Gathering

Purchasing

Store #2

No

Store #3

Yes

Store #4

search costs7
Search Costs
  • Simultaneous search involves collecting information from a number of different sources at one time, and then evaluating this information simultaneously.
  • Parallel evaluation
  • Example: Open-source software development as a search and discovery process
  • Costs of simultaneous search stem from the need to organize the evaluation process to make comparisons of complex information
  • Related cost of determining what to deliver when a simultaneous search is requested
internet search market
Internet Search Market
  • Components
    • Content Providers
      • Primary information content provided by sellers about products
      • Available in digital and non-digital forms
      • Primary sources: company web sites, advertising
      • Secondary sources: bot-generated indices and evaluation databases
    • Selection Processes
      • Information queries
      • Interactive vs. non-interactive
    • Information Access
      • Connecting to the web sites and retrieving useful information
internet search market9
Internet Search Market
  • Efficiency of Search

Content available

on the internet

Content provided

in physical market

Relevant information

selected and categorized

Accessed and retrieved

information

internet search market10
Internet Search Market
  • Some examples of inefficient search
    • Some information relevant to selection is not available online
internet search market11
Internet Search Market
  • Some examples of inefficient search
    • Relevant information is not accessible
internet search market12
Internet Search Market
  • Some examples of inefficient search
    • Only some relevant information is accessible
internet search market13
Internet Search Market
  • Intermediation
    • Issues with asymmetric information
      • Quality screening (accuracy and availability of information)
      • Reputation
    • Congestion efficiency

VS.

Intermediary

search engines
Search Engines
  • First generation search engines
    • Keyword indices
    • Associated hyperlinks for access
    • Possibility of including synonyms
    • Ranking of results based on keyword repetition
  • Inadequacies
    • Index incompleteness
    • Vulnerability to spamming
    • Cost of maintaining and updating
    • Imperfect correlation of keywords and relevant topics
search engines15
Search Engines
  • One example of a strange hit
    • Searching hotbot for “Pareto optimum”
search engines16
Search Engines
  • Second-generation search engines
    • Search algorithm based on citation analysis
    • Classification scheme based on analysis of hyperlinks
      • Web sites are classified as authorities or hubs
      • Authorities are sites that many other sites link to
      • Hubs are sites that link to many other sites
      • Algorithm begins by using keyword search to generate a set of initial authorities
      • For set of authorities, search process looks at sites that point to these authorities and classify them as a good set of initial hubs
      • For these hubs, the search process then refines the set of authorities by looking at the sites the hubs point to the most
      • Google
search engines17
Search Engines
  • How it works

Initial Set

Root Set

search engines18
Search Engines
  • Form the so-called “adjacency matrix” for the links between pages:
    • aij=1 if page i links to page j
    • aij=0 otherwise
  • Example:
search engines19
Search Engines
  • Go to spreadsheet!
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