Speaker: Prof. Charles Noussair, Department of Economics, University of Arizona
Title: Sequential Search with a Price Freeze Option - Theory and Experimental Evidence
Abstract: We study the economics of price freeze options (PFOs) by introducing them into a model of sequential search. The model makes a number of predictions, which we test in a laboratory experiment. The experiment varies (1) whether freezing is possible or not, (2) the cost of freezing, and (3) the length of the time horizon. We consider both settings in which prior offers cannot be recalled, and those in which recall is imperfect. We find that the observed treatment effects are consistent with the predictions of our model, though on average searches are terminated earlier than predicted. Interestingly, the extent of undersearching is magnified by the presence of an affordable PFO.
Bio: Charles is the Eller Professor of Economics and Director of the Economic Science Lab. His research applies experimental methods to a number of different fields of economics. Charles studies how individuals deal with risky decisions and how they solve collective action problems. Charles also conducts research using experimental methods to explore the behavior of asset markets and to study issues in macroeconomics. One of his current interests is the impact of emotions on economic decision making.