Essays on consumer search behavior

In this dissertation, I investigate how the costly search for the price and quality information on behalf of the consumers impacts their optimal brand choice behavior. In the first essay titled "Active versus Passive Loyalty: A Structural Model of Consideration Sets", I investigate how the price uncertainty impacts the consideration and choice behavior of the consumers. I empirically test how the consumers' beliefs about the prices of the brands, the presence of price advertisements and the consumers' demographics impact the price search behavior of the consumers. In the second essay titled "Consumer Learning and Unlearning: A Structural Model of Variety Seeking", I investigate how the quality uncertainty impacts the consideration and choice behavior of the consumers. I empirically test how quality learning, unlearning and the forward-looking behavior impact the consideration and choice behavior of the consumers. For both the essays, I empirically test the models on scanner data sets for two product categories: liquid detergents and ketchup.; The key theoretical results of both the essays are as follows: First, a consumer does not stay in a passive state (where the consumer repeatedly purchases a brand for which she has a relatively low search cost). Second, consumers with higher price sensitivities have larger consideration sets as compared to those with less price sensitivities. Third, high frequency and depth of promotions lead to large consideration sets. Fourth, a forward-looking consumer's preference increases for a brand if her uncertainty in its quality beliefs increases. Fifth, depreciation increases the uncertainty in the quality of brands and shifts the expected quality beliefs in the direction of the prior quality beliefs about the brand. Also, the increase in the uncertainty and the decrease in the expected quality beliefs in the brands are increasing and concave functions of the length of the forgetting time. Sixth, depreciation of quality beliefs can have both a positive and a negative impact on the brand's preferences depending on the rate of quality learning and unlearning and the extent of the future looking behavior of the consumer. And finally, in product categories where there is large uncertainty in the perceived qualities of the brands, the sizes of the consideration sets of the consumers are small.; The key empirical results of both the essays are as follows: First, consumers have high inherent search costs for discovering the posted prices of any of the brands. These search costs are higher for detergents than for ketchup. Second, these search costs are significantly reduced by the presence of feature advertisements and in-store displays. For detergents, feature advertising reduces the search costs more than in-store displays. But for ketchup, both are equally effective in reducing the search costs. Third, the rate of learning and unlearning about the true qualities is more for detergents than for ketchup. Fourth, consumers are forward looking in their behavior in the sense that they do try out brands whose quality they are uncertain about, hoping that if the quality of the brand turns out to be good, they would benefit in the future consumption experiences. (Abstract shortened by UMI.)...