Search and the development of the economics of information

Abstract

In this paper we trace the evolution of economic search theory and the concomitant accumulation of insights so as to elucidate is successes as well as its central location within the economics of information. The reason for the phenomenal success of search theory is twofold. First, Stigler’s fixed sample search was the first entrant in the literature to explicity model the acquisition of information; furthermore, it was elegant in its simplicity. Second, it was efficacious: it easily accommodated the application of standard methods to endogenously determine the amount of information acquired, thereby extending the Marshallian framework to allow for an explain such phenomena as idle resources and “violations” of the law of one price. After taking up Stigler’s pioneering 1961 paper, we continue by considering pre Stiglerian contributions acquisition and then McCall’s sequential search model and the mathematical developments leading up to it. Following a discussion of further developments in job search and extensions of search to new contexts, we conclude by arguing that search is a concept of enormous breadth.