Quantifying search and switching costs in the US auto insurance industry

• 成果类型: Article
• 署名作者: Honka, Elisabeth
• 署名单位: University of Texas System; University of Texas Dallas
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12073
• 发表日期: 2014
• 页码: 847-884
• 关键词: consideration set; dynamic-model; price; CHOICE; brand; uncertainty; dependence; MARKET

摘要

I estimate demand for auto insurance in the presence of two types of market frictions: search and switching costs. I develop an integrated utility-maximizing model in which consumers decide over which and how many companies to search and from which company to purchase. My modelling approach rationalizes observed consideration sets as being the outcomes of consumers' search processes. I find search costs to range from $35 to $170 and average switching costs of $40. Search costs are the most important driver of customer retention and their elimination is the main lever to increase consumer welfare in the auto insurance industry.