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.

BREAKING DOWN '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.

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