Multi-Commodity Consumer Search☆

Abstract This paper analyses the optimal search strategy for consumers who wish to purchase several different commodities, possibly from several different firms, but are not perfectly informed about the prices charged by each firm for every commodity. It is shown that in general the optimal search strategy will not possess the Reservation Property, the multi-commodity equivalent of a Reservation Price. Necessary and sufficient conditions are identified for the optimal search strategy to possess the Reservation Property, and it is shown that a critical sufficient condition is that the indirect utility function is submodular. Comparative static results are also presented. Journal of Economic Literature Classification Numbers: D11, D81, D83.

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