Repeat Consumer Search

Consumers are usually interested in buying a product repeatedly over time, but need to search for information on firms’ prices and product features. We characterize the optimal search rule in this environment, showing that under certain conditions consumers `stagger’ their search across periods i.e. they buy several different products early on before settling on one which they then buy repeatedly. We also solve for equilibrium prices, examine how they change as the market matures, and compare them to the usual one-shot search problem. Finally we investigate how the market evolves when firms may offer discounts to past consumers.