Experience Premium in Consumer Search: Evidence from Drivers’ Refueling Behavior

Résumé

Why do uninformed consumers pay more? A long-standing answer is market unfamiliarity. Yet how much it contributes to information frictions, and whether it fades with experience, have not been directly measured. I answer these questions using millions of fuel purchases by Japanese drivers. Identification exploits two kinds of variation in familiarity, from travel and relocation. Comparing the same driver across markets, I find that unfamiliarity accounts for 62% of the price gap between informed and uninformed consumers, while persistent individual differences explain the rest. This unfamiliarity-driven gap (the experience premium) declines with repeated purchases, consistent with learning in consumer search.