Beyond Plain Vanilla: Modeling Joint Product Assortment and Pricing Decisions
AbstractIn this paper, we take a first step toward exploring empirically the product assortment strategies of oligopolistic firms. Our starting point is a discrete- choice demand model for differentiated products. We incorporate the demand model into an equilibrium supply model, in which firms compete by first choosing which products to offer and then by setting prices. We show how modeling joint product assortment and pricing decisions enriches standard product choice models by allowing insights into how demand characteristics affect firms' product offerings in a competitive environment. We furthermore demonstrate that incorporating endogenous product choice into demand models is essential for policy simulations (e.g., mergers) as it entails at times dramatically different welfare assessments than the common assumption that product assortments are exogenous.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1982.
Date of creation: Oct 2007
Date of revision:
Contact details of provider:
Postal: Stanford University, Stanford, CA 94305-5015
Phone: (650) 723-2146
Web page: http://gsbapps.stanford.edu/researchpapers/
More information through EDIRC
Other versions of this item:
- Michaela Draganska & Michael Mazzeo & Katja Seim, 2009. "Beyond plain vanilla: Modeling joint product assortment and pricing decisions," Quantitative Marketing and Economics, Springer, vol. 7(2), pages 105-146, June.
- L0 - Industrial Organization - - General
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- L8 - Industrial Organization - - Industry Studies: Services
- M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
- NEP-CMP-2008-08-31 (Computational Economics)
- NEP-COM-2008-08-31 (Industrial Competition)
- NEP-MIC-2008-08-31 (Microeconomics)
- NEP-MKT-2008-08-31 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Reiss, Peter C & Spiller, Pablo T, 1989. "Competition and Entry in Small Airline Markets," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages S179-202, October.
- Bresnahan, T.F & Reiss, P.C., 1989.
"Entry And Competition In Concentrated Markets,"
151, Stanford - Studies in Industry Economics.
- Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 833-882.
- Caplin, A. & Nalebuff, B., 1989.
"Aggregation And Imperfect Competition: On The Existence Of Equilibrium,"
1989_30, Columbia University, Department of Economics.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Cowles Foundation Discussion Papers 937, Cowles Foundation for Research in Economics, Yale University.
- Venkatesh Shankar & Ruth N. Bolton, 2004. "An Empirical Analysis of Determinants of Retailer Pricing Strategy," Marketing Science, INFORMS, vol. 23(1), pages 28-49, May.
- Vassilis A. Hajivassiliou & Daniel L. McFadden, 1998.
"The Method of Simulated Scores for the Estimation of LDV Models,"
Econometric Society, vol. 66(4), pages 863-896, July.
- V A Hajivassiliou & DL McFadden, 1997. "The Method of Simulated Scores for the Estimation of LDV Models," STICERD - Econometrics Paper Series /1997/328, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Vassilis A. Hajivassiliou & Daniel L. McFadden, 1993. "The Method of Simulated Scores for the Estimation of LDV Models," Working Papers _023, Yale University.
- repec:att:wimass:9106 is not listed on IDEAS
- Michaela Draganska & Dipak C. Jain, 2006. "Consumer Preferences and Product-Line Pricing Strategies: An Empirical Analysis," Marketing Science, INFORMS, vol. 25(2), pages 164-174, 03-04.
- Aviv Nevo, 2003.
"Measuring Market Power in the Ready-to-Eat Cereal Industry,"
- Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-42, March.
- Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Research Reports 25164, University of Connecticut, Food Marketing Policy Center.
- Nevo, Aviv, 1999. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Competition Policy Center, Working Paper Series qt7cm5p858, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
- Raphael Thomadsen, 2007. "Product Positioning and Competition: The Role of Location in the Fast Food Industry," Marketing Science, INFORMS, vol. 26(6), pages 792-804, 11-12.
- Heckman, James J, 1978.
"Dummy Endogenous Variables in a Simultaneous Equation System,"
Econometric Society, vol. 46(4), pages 931-59, July.
- James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
- Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
- Steven T. Berry & Joel Waldfogel, 2001. "Do Mergers Increase Product Variety? Evidence From Radio Broadcasting," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1009-1025, August.
- Amit Gandhi & Luke Froeb & Steven Tschantz & Gregory J. Werden, 2008. "POST-MERGER PRODUCT REPOSITIONING -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 49-67, 03.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Hwang, M. & Bronnenberg, B.J. & Thomadsen, R., 2010. "An empirical analysis of assortment similarities across U.S. supermarkets," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3736994, Tilburg University.
- Crawford, Gregory S., 2012.
"Endogenous Product Choice : A Progress Report,"
The Warwick Economics Research Paper Series (TWERPS)
979, University of Warwick, Department of Economics.
- Toro-González Daniel & Gallardo R. Karina & Yan Jia & McCluskey Jill J., 2013.
"Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes,"
Journal of Agricultural & Food Industrial Organization,
De Gruyter, vol. 11(1), pages 11, September.
- Daniel Toro-Gonzalez & Jia Yan & Karina Gallardo & Jill McCluskey, 2012. "Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes," Working Papers 2012-6, School of Economic Sciences, Washington State University.
- Gal OEstreicher-Singer & Barak Libai, 2011. "Assessing Value in Product Networks," Working Papers 11-29, NET Institute, revised Sep 2011.
- Mitsukuni Nishida, 2012. "Estimating a Model of Strategic Network Choice: The Convenience-Store Industry in Okinawa," Economics Working Paper Archive 594, The Johns Hopkins University,Department of Economics.
- Karray, Salma, 2013. "Periodicity of pricing and marketing efforts in a distribution channel," European Journal of Operational Research, Elsevier, vol. 228(3), pages 635-647.
- Chen, Yongmin & Gayle, Philip, 2013. "Mergers and Product Quality: Evidence from the Airline Industry," MPRA Paper 51238, University Library of Munich, Germany.
- Toro-Gonzalez, Daniel & Yan, Jia & Gallardo, Rosa Karina & McCluskey, Jill J., 2012. "Demand Estimation In The Presence Of An Unobservable Product Attribute: The Case Of Mint Quality," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 123518, Agricultural and Applied Economics Association.
- Maria Ferreyra & Brett Gordon & Dennis Epple, 2011. "Charter School Entry in Market Equilibrium: The Case of Washington, DC," 2011 Meeting Papers 1266, Society for Economic Dynamics.
- Sumon Datta & K. Sudhir, 2012. "Does Reducing Spatial Differentiation Increase Product Differentiation? Effects of Zoning on Retail Entry and Format Variety," Cowles Foundation Discussion Papers 1851, Cowles Foundation for Research in Economics, Yale University, revised Sep 2012.
- Stephen P. Ryan & Catherine Tucker, 2011.
"Heterogeneity and the Dynamics of Technology Adoption,"
NBER Working Papers
17253, National Bureau of Economic Research, Inc.
- Stephen Ryan & Catherine Tucker, 2012. "Heterogeneity and the dynamics of technology adoption," Quantitative Marketing and Economics, Springer, vol. 10(1), pages 63-109, March.
- Stephen Ryan & Catherine Tucker, 2006. "Heterogeneity and the Dynamics of Technology Adoption," Working Papers 06-26, NET Institute, revised Oct 2006.
- Jan K. Brueckner & Dan Luo, 2013. "Measuring Strategic Firm Interaction in Product-Quality Choices: The Case of Airline Flight Frequency," CESifo Working Paper Series 4066, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.