Article ID: | iaor1995562 |
Country: | Netherlands |
Volume: | 17 |
Issue: | 5/6 |
Start Page Number: | 771 |
End Page Number: | 784 |
Publication Date: | Sep 1993 |
Journal: | Journal of Economic Dynamics and Control |
Authors: | Chou Chien-fu, Talmain Gabriel |
Keywords: | statistics: empirical |
The authors analyze the search problem of a consumer who derives information only from the sequential search process. This paper considers the case of a consumer who uses a nonparametric procedure to estimate the probability distribution. It is shown that a solution to the consumer’s problem is a very simple strategy which depends only on the order statistics, on the discounting factor, and on the duration of the search. It leads to a finite search almost surely. This optimal strategy is a myopic rule which is computable and which is characterized by a sequence of strictly increasing reservation prices.