Abstract

This article develops a method to estimate search frictions as well as preference parameters in differentiated product markets. Search costs are nonparametrically identified, which means our method can be used to estimate search costs in differentiated product markets that lack a suitable search cost shifter. We apply our model to the U.S. Medigap insurance market. We find that search costs are substantial: the estimated median cost of searching for an insurer is $30. Using the estimated parameters we find that eliminating search costs could result in price decreases of as much as $71 (or 4.7%), along with increases in average consumer welfare of up to $374.

摘要

本文开发了一种方法来估计差异产品市场中的搜索摩擦以及偏好参数。搜索成本是非参数确定的，这意味着我们的方法可用于估计缺乏合适搜索成本转移器的差异化产品市场中的搜索成本。我们将模型应用于美国Medigap保险市场。我们发现搜索成本很高：搜索保险公司的估计中值成本为30美元。使用估计的参数，我们发现消除搜索成本可能导致价格下降多达71美元（或4.7％），并且平均消费者福利最高会提高374美元。