When Do Consumers Search

From the beginning of the literature on the economics of information, theory has predicted that consumers will weigh their cost of additional search against the benets they expect from that search. e benets, in turn, depend on the dispersion of prices established by sellers. But given that search is occasioned by imperfect information, it is dicult to model the factors that cause consumers to incur the costs of obtaining additional draws from the distribution of prices. In this paper, we provide empirical evidence that relates search behavior to price movements. In particular, we investigate the relationship between the behavior of gasoline prices and consumer search as measured by trac statistics for web sites that report gasoline pricing information for individual stations. We show empirically that when consumers observe rising prices, they increase the amount of search that they undertake. eir response, however, is asymmetric—falling prices stimulate far less search, even though cost shocks that increase gasoline price dispersion will yield greater returns to search whether prices are rising or falling. Our results help to explain the asymmetric response of retail prices to cost shocks observed in gasoline markets. Rising wholesale gasoline prices are reected almost immediately at th