Template-Type: ReDIF-Paper 1.0
Author-Name: Athanasios Geromichalos
Author-Name-First: Athanasios
Author-Name-Last: Geromichalos
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Directed Search and the Bertrand Paradox
Abstract: 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.
Length: 23
File-URL: https://repec.dss.ucdavis.edu/files/LS44Hjckk67Jo1vrgSKhRbVL/12-21.pdf
File-Format: application/pdf
Number: 243
Classification-JEL: 
KeyWords: Directed Search, Bertrand Paradox, Capacity Constraints, Congestion Effects, State-contingent Pricing
Creation-Date: 20120924
Handle: RePEc:cda:wpaper:243