Pricing, Product Diversity and Search Costs: A Bertrand-Chamberlin-Diamond Model
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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Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt4cq0m6s3, Department of Agricultural & Resource Economics, UC Berkeley.
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CORE Discussion Papers RP
1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- ANDERSON, Simon P. & DE PALMA, André & NESTEROV, Yurii, 1994. "Oligopolistic Competition and the Optimal Provision of Products," CORE Discussion Papers 1994034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Asher Wolinsky, 1984. "Product Differentiation with Imperfect Information," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 53-61.
- Anderson, Simon P & Renault, Regis, 2000.
"Consumer Information and Firm Pricing: Negative Externalities from Improved Information,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 721-42, August.
- 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.
- Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
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