What are search and information costs?

Search and information costs are the effort you put in to find something or learn about it, like looking for your favorite toy in a messy room.

Imagine you have a big toy box full of toys, but it’s all jumbled up. If you want to play with your red dinosaur, you need to dig through the pile until you find it. That digging is search cost, the time and energy you spend looking for something.

Now imagine you don’t know what your favorite toy looks like anymore. Maybe you have to ask your brother or check a picture on your tablet. That asking or checking is information cost, the effort it takes to learn what you’re looking for.

If your room was tidy, with all your toys in labeled boxes, finding your dinosaur would be much easier, and faster! That’s how search and information costs work in real life too: when things are organized, it takes less time and energy to find or understand them.