Determinants of Consumer Search and Their Impact of Finding the Lowest Price in a Monopolistically Competitive Market: An Empirical Application to the Prerecorded Music Market

257 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1988.This dissertation theoretically and empirically analyzes how one might differentiate between consumers whose awareness of and responsiveness to price differences is high and those who are relatively unaware buyers.Three different subject areas were found to be important in achieving a full understanding of consumer search: traditional economic theory, marketing and consumer research, and behavioral economics.The theory developed synthesizes work from these various areas and identifies the following items as playing a role in whether or not a consumer pays the lowest price for a good. (1) The quantity of an item purchased. This is important because: (a) consumers may spread any fixed element of search cost over a number of purchases; and (b) individuals who buy a large amount of a particular product are usually psychologically involved with the item and conduct more ongoing search than infrequent buyers of the good. (2) Consumers differ in their cognitive abilities to process information due to personal differences and variations in their shopping experience.Other explanations of why a consumer may not actually pay the lowest price for an item revolve around the traditional monopolistic competitive concept of a producer differentiating his product offering or marketing strategy.A survey of 107 record buyers at the point of purchase is conducted to determine the price they paid for items and other salient consumer characteristics.The empirical analysis employs a TOBIT regression procedure and finds the amount of expenditures on a good, the age of the consumer (or dependent status), and whether or not the consumer made other purchases on the shopping trip to be statistically significant factors in an empirical model of who actually pays the lowest price for prerecorded music. Heavy spenders on records and tapes, older or non-dependent buyers, and purchasers who were not buying other items on the shopping trip were found to be more likely to pay the lowest price for a good than the opposing categories of consumers.Important extensions of the current study include segmenting consumers by actual cognitive measures and achieving a better understanding of the supply side of the prerecorded music industry.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD