Reference no: EM131766906

All other things being equal, the lower the incremental cost of searching, the more searching will take place. Therefore some say that the Internet will expand greatly the amount of searching effort (money and time expended) by buyers. Others disagree and argue that the Internet enables people to expend less effort on search.

Which reaction is consistent with Stigler's model?

The expansion of effort position; specialized sites and search engines make it possible to compare many more goods and options in one search than ever before at a fraction of physical search or shopping costs. Given the low incremental costs of search, more will be undertaken.

The reduction of money and time expended position; the Internet makes the expected return on an initial search much greater (more efficient) than physical search but incremental returns to successive searches may become very small quickly.

The actual amount of search effort may well decline because the point at which expected returns equals incremental search cost might occur very early.