Nonparametric search

Nonparametric search

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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: ,
Keywords: statistics: empirical
Abstract:

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.

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