Does Information Mitigate Behavioral Gaps Due to Market Inexperience? Evidence from a Field Experiment

Abstract

In this paper, we evaluate the effect of price information on consumer search and purchasing behavior. We collect detailed individual-level purchasing and search data on 2,449 consumers in the UNC-Chapel Hill textbook market. A random subset of these consumers are provided with information about the price of their assigned textbooks from various retailers before the semester begins. We use these data to compare the search and purchasing outcomes of consumers who receive information from their instructors (treatment group) with outcomes of consumers who do not receive this information (control group). We find that (i) information leads to more online search activity and online purchases, (ii) the informational treatment reduces the gap in online search behavior between consumers across experience levels, and (iii) the treatment increases take-up of the textbook at the extensive margin. Additionally, we solicit beliefs about the price distribution of general textbooks from the same participants and find that although the treatment helps inexperience consumers update on the mean of the textbooks, they do not update their beliefs about the distribution of prices.