The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Search Theory

  • P. Diamond
Reference work entry


Search theory analyses resource allocation with imperfect technologies for informing agents of trading opportunities and for bringing together potential traders. This article examines some search theory analyses using a variety of special allocation mechanisms together with very simple preferences and production technologies. It explores models where information is gathered from visiting stores, and then looks at the changes that come from additional devices for information spread. It examines price setting both on a take-it-or-leave-it basis and resulting from idealized negotiations. While the presentation is in terms of a retail market, a similar approach has been useful in labour economics.


Advertising Bargaining Competitive equilibrium Equilibrium Job search Law of one price Poisson distribution law Price reputation Reservation price Search costs Search theory Walrasian analysis 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Diamond, P. 1984. A search-equilibrium approach to the micro foundations of macroeconomics. Cambridge, MA: MIT Press.Google Scholar
  2. Kiefer, N., and G. Neumann. 1979. An empirical job search model with a test of the constant reservation wage hypothesis. Journal of Political Economy 87: 69–82.Google Scholar
  3. Mortensen, D. 1984. Job search and labor market analysis. In Handbook of labour economics, ed. R. Layard and O. Ashenfelter. Amsterdam: North-Holland.Google Scholar
  4. Rothschild, M. 1974. Searching for the lowest price when the distribution is not known. Journal of Political Economy 82: 689–711.CrossRefGoogle Scholar
  5. Rubinstein, A., and A. Wolinsky. 1985. Equilibrium in a market with sequential bargaining. Econometrica 53: 1133–1150.CrossRefGoogle Scholar
  6. Salop, S. 1977. The noisy monopolist: Imperfect information, price dispersion and price discrimination. Review of Economic Studies 44: 393–406.CrossRefGoogle Scholar
  7. Satterthwaite, M. 1979. Consumer information, equilibrium industry price, and the number of sellers. Bell Journal of Economics 10 (2): 483–502.CrossRefGoogle Scholar
  8. Shilony, Y. 1977. Mixed pricing in oligopoly. Journal of Economic Theory 14: 373–388.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • P. Diamond
    • 1
  1. 1.