In a recent paper Hong and Shum (2006) present a structural method to estimate search cost distributions. We extend their approach to the case of oligopoly and present a new maximum likelihood method to estimate search costs. We apply our method to a data set of online prices for different computer memory chips. The estimates suggest that the consumer population can be roughly split into two groups which either have quite high or quite low search costs. Search frictions confer a significant

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... nt of market power to the firms: despite more than 20 firms operating in each of the markets, we estimate price-cost margins to be around 25%. The paper also illustrates how the structural method can be employed to simulate the effects of the introduction of a sales tax. 1 See e.g. Janssen and Moraga-González (2004) for the influence of the magnitude of search costs on equilibrium search intensity and market competitiveness. 2 There is a well-established literature in labor economics that structurally estimates models of job search. Key contributions in this literature are Eckstein and Wolpin (1990) and Van den Berg and Ridder (1998) . This literature, recently surveyed in Eckstein and Van den Berg (2007) , has studied, among other issues, wage dispersion, duration of unemployment, minimum wage policies, returns to schooling and earnings inequality. The empirical work using models where search efforts are endogenous is however relatively small. For a first attempt to estimate search cost distributions in labor markets see Gautier et al. (2007) .