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Consumers and Competition

Author

Listed:
  • Waterson, Michael

    (Department of Economics, University of Warwick)

Abstract

This paper shows that even if all consumers face search costs, if these are below a certain level dependent upon the firm numbers and demand elasticity, the Diamond-type equilibrium with all prices at the monopoly level fails to exist.

Suggested Citation

  • Waterson, Michael, 2003. "Consumers and Competition," The Warwick Economics Research Paper Series (TWERPS) 679, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:679
    as

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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp679.pdf
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    References listed on IDEAS

    as
    1. Rees, Ray, 1993. "Collusive Equilibrium in the Great Salt Duopoly," Economic Journal, Royal Economic Society, vol. 103(419), pages 833-848, July.
    2. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    3. Hehenkamp, Burkhard, 2002. "Sluggish Consumers: An Evolutionary Solution to the Bertrand Paradox," Games and Economic Behavior, Elsevier, vol. 40(1), pages 44-76, July.
    4. Domberger, Simon & Sherr, Avrom, 1989. "The impact of competition on pricing and quality of legal services," International Review of Law and Economics, Elsevier, vol. 9(1), pages 41-56, June.
    5. Rees, Ray, 1993. "Collusive Equilibrium in the Great Salt Duopoly," Munich Reprints in Economics 3413, University of Munich, Department of Economics.
    6. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    7. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lach, Saul & Moraga-González, José-Luis, 2009. "Heterogeneous Price Information and the Effect of Competition," CEPR Discussion Papers 7319, C.E.P.R. Discussion Papers.
    2. Emanuele Giovanetti, 2005. "Diagonal mergers and foreclosure in the internet," Working Papers 80, University of Rome La Sapienza, Department of Public Economics.
    3. Waterson, Michael, 2003. "The role of consumers in competition and competition policy," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 129-150, February.
    4. Donatella Porrini & Giovanni B. Ramello, 2005. "Competition in banking: switching costs and the limits of antitrust enforcement," Chapters,in: Law and the State, chapter 13 Edward Elgar Publishing.

    More about this item

    Keywords

    Diamond Paradox ; Search Behaviour ; Oligopoly pricing;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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