An Experimental Examination of the Economics of Information

This article presents an experimental test of propositions that come from Stigler's classic economics of information theory. It reviews previous empirical evidence for the propositions and discusses the mixed support provided for the theory. It also discusses a major assumption of the theory and presents hypotheses that suggest that the propositions are not as universal as has been thought. The results indicate that buyers with more certain beliefs about retailer-price images search less and are less responsive to changes in the costs and benefits of search than buyers with less certain beliefs. Finally, the article discusses the implications of the results for both economies and marketing. I na seminal work published in 1961, George Stigler argued that buyer information search behavior could have an important impact on the competitive price structure of markets. Stigler's model has been revised (Rothschild 1974; Salop and Stiglitz 1977; Wilde and Schwartz 1979), but its basic thrust is still intact. His primary contribution lies in recognizing that not all buyers will be perfectly informed about marketplace alternatives because individual buyers place different values on the costs of and returns from search. Researchers in marketing have cited Stigler's eco-nomics of information (EOI) framework regularly, using it as an intuitive description of consumer search be