Directed search and the Bertrand paradox

Arbeitspapier

I study a directed search model of oligopolistic competition, extended to incorporate general capacity constraints, congestion effects, and pricing based on ex-post realized demand. I show that as long as any one of these ingredients is present, the Bertrand paradox will fail to hold. Hence, I argue that, despite the emphasis that has been placed by the literature on sellers' capacity constraints as a resolution to the paradox, the existence of such constraints is only a subcase of a general class of environments where the paradox fails. More precisely, Bertrand's paradox will not arise whenever the buyers' expected utility from visiting a specific seller is decreasing in that seller's realized demand.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 12-21

Classification and Topics

• Classification: Wirtschaft ; Bargaining Theory; Matching Theory ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets
• Subject: directed search ; Bertrand paradox ; capacity constraints ; congestion effects ; state-contingent pricing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Geromichalos, Athanasios
• Event: Veröffentlichung
• (who): University of California, Department of Economics
• (where): Davis, CA
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/79679
• Last update: 10.03.2025, 11:42 AM CET