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Pricing, Product Diversity and Search Costs: A Bertrand-Chamberlin-Diamond Model

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Author Info

  • Anderson, S.P.
  • Renault, R.

Abstract

Bertrand argued that price would be driven down to marginal cost even with only two firms in the market. Chamberlin, by introducing product differentiation, argued that price will exceed marginal cost even when there are many firms. Thus product differentiation resolves the "Bertrand Paradox". Diamond argued that firms would set monopoly prices in the Bertrand context if consumers face search costs.

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Bibliographic Info

Paper provided by Toulouse - GREMAQ in its series Papers with number 97.481.

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Length: 25 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:fth:gremaq:97.481

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Postal: GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.
Phone: 05.61.62.85.56
Fax: 05 61 22 55 63
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Web page: http://www-gremaq.univ-tlse1.fr/
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Keywords: OLIGOPOLIES ; PRICING ; CONSUMERS ; ECONOMIC EQUILIBRIUM;

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References

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  1. Anderson, S. P. & De Palma, A. & Nesterov, Y., . "Oligopolistic competition and the optimal provision of products," CORE Discussion Papers RP -1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Perloff, Jeffrey M & Salop, Steven, 1984. "Equilibrium with product differentiation," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4cq0m6s3, Department of Agricultural & Resource Economics, UC Berkeley.
  3. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  4. Deneckere, Raymond J & Rothschild, Michael, 1992. "Monopolistic Competition and Preference Diversity," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 361-73, April.
  5. Wolinsky, Asher, 1984. "Product Differentiation with Imperfect Information," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 53-61, January.
  6. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
  7. Simon P. Anderson & Regis Renault, 1997. "Consumer Information and Firm Pricing: Negative Externalities from Improved Information," Virginia Economics Online Papers 338, University of Virginia, Department of Economics.
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