Consider a consumer who is searching for the lowest price for good X.The consumer knows that 75 percent of the time she will find a store charging $10 and 25 percent of the times she will find a store charging $7.The consumer will search again if her marginal cost of searching is constant and is

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The expected price reduction from searching again is $0.75 (0.25 * ($10 - $7)). The consumer will search if the marginal cost is less than or equal to this expected benefit.

Consider a Consumer Who Is Searching for the Lowest Price