Nested search
Theoretical Economics
2026-02-04 v1
Abstract
I introduce and study a nested search problem modeled as a tree structure that generalizes Weitzman (1979) in two ways: (1) search progresses incrementally, reflecting real-life scenarios where agents gradually acquire information about the prizes; and (2) the realization of prizes can be correlated, capturing similarities among them. I derive the optimal policy, which takes the form of an index solution. I apply this result to study monopolistic competition in a market with two stages of product inspection. My application illustrates that regulations on drip pricing lower equilibrium price and raise consumer surplus.
Keywords
Cite
@article{arxiv.2602.03720,
title = {Nested search},
author = {Yutong Zhang},
journal= {arXiv preprint arXiv:2602.03720},
year = {2026}
}