Search Costs
Updated 2026-08-11
INTRODUCTION
English translation pending.
CORE DEFINITION
Search costs are the resources of time, money, and attention required to learn prices, quality, and availability before a transaction. George Stigler formalized the idea in 1961, showing that even identical goods trade at different prices because buyers cannot know every offer for free. Because each additional round of searching yields diminishing information at a roughly constant cost, there is an optimal stopping point. Price dispersion, brand premiums, and intermediaries such as brokers and comparison sites are equilibrium responses to this constraint rather than market failures.
SCAFFOLDING EFFECT
Reduce cognitive load
- Stopping rule: decide when more research no longer pays for itself - Price gap reading: judge whether a price difference reflects real value or search friction - Intermediary test: check whether paying someone else to search costs less than searching yourself
Anchor fast decisions
Information is not free: every additional quote or inspection consumes time and money while revealing less new information than the previous one. Marginal benefit therefore falls while marginal cost stays flat, which creates a stopping point rather than an endless search. Sellers know buyers face these costs, so they can hold prices above the competitive level and still keep customers. Intermediaries survive because they spread one search across many buyers and lower the per-buyer cost of finding a match.
MINIMUM ACTION
In progress 0/1Practice this model in one real situation:
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Source support: Explicit
- mungermodels.comhttps://mungermodels.com/models/search-costsverified
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