Sequential Search and Weak Signals

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Jeong Hyun Lee


Introduction: Our everyday decisions are often based on incomplete information on alternatives, which we use to formulate our attention. In this study, we examine a specific case under the sequential search model, where the prior information given to the decision maker consists of a weak signal on the true qualities of the alternatives.

Literature Review/Research Gap: This study is an expansion of the Pandora’s box problem by Choi and Smith (2022).

Research Method: Extending Choi and Smith (2022)’s two factor sequential search model, the study creates a simulation to estimate Pandora’s box phenomenon and find that in fact, signals regarding the search order of the alternatives are more pertinent to the optimal choice that the decision maker makes than the signals concerning their qualities. In addition, we simulate a search environment where we observe the effects of dispersing the observed and unobserved factors under the Choi and Smith model and indeed confirm the results of their paper extends under our framework.

Findings: This study finds a more dispersed distribution of signals (the observed factor) shortens search and concentrates the optimal choice to the first two alternatives in the search order. In fact, only the dispersion of the observed factor gives some influence in the optimal choice of the decision maker while the unobserved factor gives only a slight inconsistent trend towards this effect.

Theoretical and Practitioner Implications: The implication of this study is that even if some search engine gives a search result that is close to random, the decision maker will be choosing from the first page, even if the best result is on the third page. Outside the online platform, suppose a decision maker in a supermarket. He is looking for protein bars and enters the aisle with protein bars. Assuming the different brands of protein bars provide more or less the same nutrition and health effects, the decision maker will most likely select one of the first three protein bars he examines, and he will examine each protein bar in the order based on the prices and the brand names that he easily observes from the aisle.

Australian Academy of Business Research, volume 1, issue 1, September 2023, pp 11-19

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