Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 14 - Imperfect Information: Adverse Selection and Moral Hazard - Exercises - 14.5 The Economics of Consumer Search - Page 336: 5.5

Answer

increase search increases

Work Step by Step

The higher the price, the greater the payoff of discovering a lower price. Greater incentive to search for a lower price. A doubling of prices $\textbf{increases}$ the marginal benefit of search at a given $\textbf{search}$ cost, and the percentage gap between the reservation price and the lowest price $\textbf{increases}$. This happens because when prices rise, the potential savings from finding a lower price become more substantial, making search more worthwhile.
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