Working Paper: Consumer good search: theory and evidence

Working Paper - April 2021 - No. 176

Authors Darougheh, Saman
Subject Research; Households
Type Working paper
Year 2021
Published 20 April 2021
Abstract icon When households search more for low prices on consumer goods, they lower firms' markups. The extent to which household search affects these markups fluctuates with the business cycle, which has been used in various macroeconomic models to generate pro-cyclical fluctuations in the markups. This Working Paper shows that it is difficult to align the basic underlying search model with the empirical differences in search between employed and unemployed individuals, and cautions against using these models in the context of business cycles.