Time Costs and Search Behavior

Hsiao, Yu-Chin and Kemp, Simon and Servátka, Maroš and Ward, Matt and Zhang, Le (2021): Time Costs and Search Behavior.

Abstract

Sequential search is often costly and time-consuming. The time cost is usually unknown ex ante and its presence and duration must be inferred as the search progresses. We disentangle the effect of time cost on search behavior from people’s (in)ability to perceive time delay between offers. We find that people are able to infer the existence of the time cost, but their inference is imperfect. We also compare the effect of time cost with the effect of monetary cost and find that the time cost reduces the amount of exerted search, but not as much as the monetary cost does. Discriminating between the effects is critical for increasing the empirical validity of search models and designing mechanisms capable of improving the quality of decisions, especially in unfamiliar or infrequently encountered situations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sequential Search, Time Cost, Search Cost, Experiment
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness

References

Angelovski, A., & Güth, W. (2020). When to stop—A cardinal secretary search experiment. Journal of Mathematical Psychology, 98, 102425.

Bakos, J. Y. (1997). Reducing buyer search costs: Implications for electronic marketplaces. Management Science, 43(12), 1676-1692.

Bearden, J. N., Murphy, R. O., Rapoport, A. (2005). A multi-attribute extension of the secretary problem: Theory and experiments. Journal of Mathematical Psychology. 49(5), 410 – 422. 10.1016/j.jmp.2005.08.002

Bearden, J. N., Rapoport, A. & Murphy, R. O. (2006). Sequential observation and selection with rank-dependent payoffs: An experimental study. Management Science, 52(9), 1437-1449. 10.1287/mnsc.1060.0535

Bhui, R. (2019). A statistical test for the optimality of deliberative time allocation. Psychonomic Bulletin and Review, 26(3), 855-867. doi:10.3758/s13423-018-1555-1

Breaban, A., Noussair, C. N., & Popescu, A. V. (2020). Contests with money and time: Experimental evidence on overbidding in all-pay auctions. Journal of Economic Behavior and Organization, 171, 391-405. doi:10.1016/j.jebo.2020.01.005

Brown, A. L., Meer, J., & Williams, J. F. (2019). Why do people volunteer? An experimental analysis of preferences for time donations. Management Science, 65(4), 1455-1468. doi:10.1287/mnsc.2017.2951

Christian, B. & Griffith, T. (2016). Algorithms to live by: The computer science of human decisions. Picador: New York, NY Reviewed

Cox, J., & Oaxaca, R. (1989). Laboratory experiments with a finite-horizon job-search model. Journal of Risk and Uncertainty, 2(3), 301-329. 10.1111/j.1465-7295.1982.tb01146.x

Cox, J. C., & Oaxaca, R. L. (2000). Good news and bad news: Search from unknown wage offer distributions. Experimental Economics, 2(3), 197-225. 10.1007/BF01669196

Diamond, P. (1985). Search Theory. Manuscript prepared for the New Pelgrave.

Ferguson, T. S. (1989). Who solved the secretary problem? Statistical. Science, 4(3), 282–296. 10.1214/ss/1177012493. https://projecteuclid.org/euclid.ss/1177012493

Feller, W. (2013). An Introduction to Probability Theory and Its Applications [Russian translation], Vol. 2, Mir, Moscow (1984).

Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171-178. 10.1007/s10683-006-9159-4

Freeman, P. R. (1983). The secretary problem and its extensions: A review. International Statistical Review, 51(2), 189-206. 10.2307/1402748

Fry, H. (2015). The mathematics of love: Patterns, proofs and the search for the ultimate equation (1st T Books hardcover ed.). New York: Ted Books

Gardner, M. (1960). Mathematical games. Scientific American, 202(2), 150-156. Retrieved from http://www.jstor.org/stable/24941266

Giné, X., Townsend, R., & Vickery, J. (2008). Patterns of rainfall insurance participation in rural India. The World Bank Economic Review, 22(3), 539-566. 10.1093/wber/lhn015

Gino, F., & Mogilner, C. (2014). Time, money, and morality. Psychological Science, 25(2), 414-421. 10.1177/0956797613506438

Goldman, A., & Johansson, J. K. (1978). Determinants for search of lower prices: An empirical assessment of the economics of information theory. Journal of Consumer Research, 5(3), 176-186. 10.1086/208729

Goldszmidt, A., List, J., Metcalfe, R., Muir, I., Smith, K., & Wang, J. (2020) The Value of Time in the United States: Estimates from a Nationwide Natural Field Experiment. Working paper.

Greiner, B. (2015). Subject pool recruitment procedures: organizing experiments with ORSEE. Journal of the Economic Science Association, 1(1), 114-125. 10.1007/s40881-015-0004-4

Hsiao, Y., Kemp, S., & Servátka, M. (2020). On the importance of context in sequential search. Southern Economic Journal, 86(4), 1510–1530.

Kahan, J., Rapoport, A., & Jones, L. (1967). Decision making in a sequential search task. Perception & Psychophysics, 2(8), 374-376. 10.3758/BF03210074

Kahneman, D. (2011). Thinking, fast and slow (1st ed.). New York: Farrar, Straus and Giroux.

Kamei, K. & Markussen, T. (2020). Free Riding and Workplace Democracy – Heterogeneous Task Preferences and Sorting. Durham University working paper.

Knowles, S., & Servátka, M. (2015). Transaction costs, the opportunity cost of time and procrastination in charitable giving. Journal of Public Economics, 125, 54-63. 10.1016/j.jpubeco.2015.03.001

Kocher, M. G., Pahlke, J., & Trautmann, S. T., (2013). Tempus fugit: Time pressure in risky decisions. Management Science, 59(10), 2380-2391.10.1287/mnsc.2013.1711

Lee, L., Lee, M. P., Bertini, M., Zauberman, G., & Ariely, D. (2015). Money, time, and the stability of consumer preferences. Journal of Marketing Research, 52(2), 184-199. 10.2139/ssrn.1542283

Lilley, A., & Slonim, R. (2014). The price of warm glow. Journal of Public Economics, 114, 58-74. doi:10.1016/j.jpubeco.2013.12.004

Lindley, D. (1961). Dynamic programming and decision theory. Journal of the Royal Statistical Society. Series C (Applied Statistics), 10(1), 39-51. 10.2307/2985407

Lippman, S. A., & McCall, J. J. (1976). The Economics of job search: A survey. Economic inquiry, 14(2), 155-189. 10.1111/j.1465-7295.1976.tb00386.x

Lorko, M., Servátka, M., & Zhang, L. (2019). Anchoring in project duration estimation. Journal of Economic Behavior & Organization, 162, 49-65.

Lorko, M., Servátka, M., & Zhang, L. (2020). Improving the Accuracy of Project Schedules? Production & Operations Management, forthcoming.

Nisbett, R. E., & Wilson, T. D. (1977). The halo effect: Evidence for unconscious alteration of judgments. Journal of Personality and Social Psychology, 35(4), 250-256. 10.1037//0022-3514.35.4.250

McCall, J. J. (1970). Economics of information and job search. The Quarterly Journal of Economics, 84(1), 113-126. 10.2307/1879403

Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much (1st ed.). New York: Times Books, Henry Holt and Company.

Okada, E., & Hoch, S. (2004). Spending time versus spending money. Journal of Consumer Research, 31(2), 313-323. 10.1086/422110

Seale, D. A., & Rapoport, A. (1997). Sequential decision making with relative ranks: An experimental investigation of the "secretary problem". Organizational Behavior and Human Decision Processes, 69(3), 221-236. 10.1006/obhd.1997.2683

Seale, D. A., & Rapoport, A. (2000). Optimal stopping behavior with relative ranks: the secretary problem with unknown population size. Journal of Behavioral Decision Making, 13(4), 391-411. 10.1002/1099-0771(200010/12)13:4<391::AID-BDM359>3.0.CO;2-I

Soman, D. (2001). The mental accounting of sunk time costs: Why time is not like money. Journal of Behavioral Decision Making, 14(3), 169-185. 10.1002/bdm.370

Stiglitz, J. E. (1989). Imperfect information in the product market. Handbook of Industrial Organization, 1, 769-847.

Strayer, D. L., Drews, F. A., & Crouch, D. J. (2006). A comparison of the cell phone driver and the drunk driver. Human Factors, 48(2), 11. 10.2139/ssrn.570222

Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211(4481), 453-458. 10.1126/science.7455683

Yeo, G. F. (1998). Interview costs in the secretary problem. Australian & New Zealand Journal of Statistics, 40(2), 215-219. 10.1111/1467-842X.00024

Zwick, R., Rapoport, A., Lo, A. K. C., & Muthukrishnan, A. V. (2003). Consumer sequential search: Not enough or too much? Marketing Science, 22(4), 503-519. 10.1287/mksc.22.4.503.24909