Consumer Inferences from Product Rankings: The Role of Beliefs in Search Behavior

In online markets, consumers tend to search and purchase prominently positioned products. We develop an experimental paradigm to distinguish between two mechanisms driving this behavior: position-specific search costs and beliefs about expected returns to search. Using incentivized experiments, we find that both mechanisms exist, and short-term randomization of rankings alone does not separate the two mechanisms. Failing to account for beliefs leads to biased estimates of search costs and incorrect consumer welfare predictions under alternative recommendation systems, such as platform self-preferencing. We discuss solutions for estimating unbiased search costs in real-world search settings.

This paper was accepted by Raphael Thomadsen, marketing.

Funding: This work was supported by the UC Berkeley Fisher Center for Business Analytics.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.00761.