Search and learning in markets

Search is a process of learning and discovery. Consumers search for goods that fit their requirements and budgets, and workers search for jobs commensurate to their skills. Learning can vary by domain—whether a person learns about herself, about the other market participants, about the fit between both, or about the conditions in the larger economic environment; and it can span several domains at the same time. While the search process has traditionally been modeled as a black box where it simply takes time to locate the desired opportunity, recent work and future research will break up this process to be more explicit about the source of the problem. This has been missing partly because it is easier to model environments where everyone and everything is identical. Once it is acknowledged that people, firms and goods are different, that they learn over time about their type, and that the differences interact in important ways, new avenues for research open up. While much of existing work has focused on quantity (i.e., number of jobs found), future work is likely to focus more on the quality (i.e., how valuable is this job to society). This essay discusses which elements might shape the research in this area, and highlights the new lessons that are likely to emerge from this work.