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Finitely repeated search and the diamond paradox

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  • Fishman, Arthur

Abstract

The Diamond paradox (Diamond, 1971) asserts that in a market for a homogeneous good, if all consumers have positive search costs and search sequentially, then the unique equilibrium price is the monopoly price. I show that any finitely repeated version of this search game may support competitive prices.

Suggested Citation

  • Fishman, Arthur, 2021. "Finitely repeated search and the diamond paradox," Economics Letters, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:ecolet:v:205:y:2021:i:c:s016517652100210x
    DOI: 10.1016/j.econlet.2021.109933
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    References listed on IDEAS

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    6. 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.
    7. Janssen, Maarten C.W. & Parakhonyak, Alexei & Parakhonyak, Anastasia, 2017. "Non-reservation price equilibria and consumer search," Journal of Economic Theory, Elsevier, vol. 172(C), pages 120-162.
    8. Cabral, Luís & Gilbukh, Sonia, 2020. "Rational buyers search when prices increase," Journal of Economic Theory, Elsevier, vol. 187(C).
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Sequential search; Diamond paradox; Finitely repeated games;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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