Multiproduct Firms: A Nested Logit Approach
AbstractThie paper proves the existence of a symmetric equilibrium with multiproduct firms using a nested logit model of demand. The demand model is parametrized by two variable which characterize different dimensions of preference variety. These reflect intragroup heterogeneity and intergropu heterogeneity, a group (or nest) being the set of products produced by a firm. There are then two dimensions to market performance; the total number of firms and the range of products produced per firm. It is shown that the market equilibrium involves an excessive number of firms, but each firm provides too few products.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 973.
Date of creation: Mar 1991
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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