Search Theory

AAA

DEFINITION of 'Search Theory'

A study of buyers and sellers who cannot instantly find a commerce partner. Search theory specifically seeks the optimal strategy for those choosing from various opportunities, assuming that there is a cost related to indecision. In other words, search theory attempts to find the optimal balance between the cost of a delayed decision and the value of trying again.

INVESTOPEDIA EXPLAINS 'Search Theory'

Search theory has been influential across the field of economics. It has been used in labor economics to study unemployment caused by workers seeking more desirable jobs, and it has also been used to analyze purchasing decisions. In both instances, the desirability of a particular product or occupation is dependent on the perceived value of the alternatives available minus the undesirability of the hunt to find them.

RELATED TERMS
  1. Dollar Bear

    An investor or speculator who is negative on the outlook for ...
  2. Inward Investment

    The opposite of outward investment, an inward investment involves ...
  3. Strategic Buyer

    A type of buyer in an acquisition that has a specific reason ...
  4. Cash Market

    The marketplace for immediate settlement of transactions involving ...
  5. Head-Fake Trade

    A trade where a stock or market appears to be making a move in ...
  6. Crowded Short

    A trade on the short side with an overwhelmingly large number ...
RELATED FAQS
  1. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  2. What does it mean to be absolutely risk averse?

    Some people are absolutely risk-averse, which means that they cannot tolerate sustaining any sort of loss, even a temporary ... Read Full Answer >>
  3. How can you avoid the sunk cost trap?

    Avoid the sunk cost trap by recognizing that any investment you've made into a project or decision to date should not be ... Read Full Answer >>
  4. What is the difference between a drawdown magnitude and drawdown duration?

    Drawdown magnitude refers to an amount of money, while drawdown duration is in reference to a period of time. Drawdown is ... Read Full Answer >>
  5. What are the differences between weak, strong and semi-strong versions of the Efficient ...

    Though the efficient market hypothesis as a whole theorizes that the market is generally efficient, the theory is offered ... Read Full Answer >>
  6. Has the Efficient Market Hypothesis been proven correct or incorrect?

    There is evidence to support the reasoning behind the efficient market hypothesis, but the basic conclusion drawn from the ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Market Simulators: How To Outperform Warren Buffett

    That moment when you realize you just booked $108 million dollars in less than an hour: it puts butterflies in your stomach.
  2. Mutual Funds & ETFs

    Invest in Emerging Market Currencies with this ETF

    Why this emerging market currency ETF needs to be on your radar.
  3. Chart Advisor

    Buying Opportunities on Upside Wedge Breakouts

    Find buying opportunities in these stocks, which have seen their prices break out of long-term declining wedge patterns.
  4. Stock Analysis

    Small-Caps and Dividends: Perfect Together

    For investors, small-caps shouldn’t be just about growth. They can be powerful income tools, as well.
  5. Mutual Funds & ETFs

    VelocityShares TVIX: A Dangerous Game

    Thinking of leveraging volatility with VelocityShares Daily 2x VIX Short Term ETN? If so, proceed with caution.
  6. Active Trading Fundamentals

    How Big Data Has Changed Finance

    The vast proliferation of data and increasing technological complexities continues to transform the way industries operate and compete.
  7. Active Trading Fundamentals

    How To Avoid The 5 Most Dangerous Market Scenarios

    Recognizing the five most dangerous market scenarios can save a fortune in avoidable losses, setting the stage for long term success.
  8. Active Trading Fundamentals

    Are You Ready To Be A Professional Trader?

    Here's help in making the quantum leap from novice to crackerjack trader.
  9. Trading Strategies

    Use Round Numbers To Work The Market To Your Favor

    Trading around round numbers like 10, 50 and 100 display unique market dynamics that translate into profitable trading opportunities.
  10. Technical Indicators

    Use Volume And Emotion To Tackle Topping Patterns

    Selling short in a topping pattern offers an advantageous reward-to-risk profile, but it can be hard to find good entry prices.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center