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Multiproduct Firms: A Nested Logit Approach

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Author Info
Simon P. Anderston
Andre de Palma

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Abstract

Thie 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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File URL: http://www.kellogg.northwestern.edu/research/math/papers/973.pdf
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Publisher Info
Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 973.

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Date of creation: Mar 1991
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Handle: RePEc:nwu:cmsems:973

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Keywords: Discrete choice model oligopolistic competition multiple product firms nested logit model.

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References listed on IDEAS
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.:
  1. Anderson, Simon P & De Palma, Andre, 1992. "The Logit as a Model of Product Differentiation," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 51-67, January. [Downloadable!] (restricted)
  2. Perloff, Jeffrey M & Salop, Steven C, 1985. "Equilibrium with Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 52(1), pages 107-20, January. [Downloadable!] (restricted)
  3. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June. [Downloadable!] (restricted)
    Other versions:
  4. Kenneth E. Train & Daniel L. McFadden & Moshe Ben-Akiva, 1987. "The Demand for Local Telephone Service: A Fully Discrete Model of Residential Calling Patterns and Service Choices," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 109-123, Spring. [Downloadable!] (restricted)
  5. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January. [Downloadable!] (restricted)
    Other versions:
  6. Besanko, David & Perry, Martin K & Spady, Richard H, 1990. "The Logit Model of Monopolistic Competition: Brand Diversity," Journal of Industrial Economics, Blackwell Publishing, vol. 38(4), pages 397-415, June. [Downloadable!] (restricted)
  7. Deneckere, Raymond J & Rothschild, Michael, 1992. "Monopolistic Competition and Preference Diversity," Review of Economic Studies, Blackwell Publishing, vol. 59(2), pages 361-73, April. [Downloadable!] (restricted)
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  8. Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Blackwell Publishing, vol. 36(4), pages 431-42, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Patrick Paul Walsh & Franco Mariuzzo & Ciara Whelan, 2005. "Merger Control in Differentiated Product," Trinity Economics Papers tep10, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  2. Andre dePalma & Karim Kilani, 2000. "The Optimal of Provision of Products with Income Effects," Econometric Society World Congress 2000 Contributed Papers 1299, Econometric Society. [Downloadable!]
  3. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2005. "Merger Control in Differentiated Product Industries," Working Papers 200508, School Of Economics, University College Dublin. [Downloadable!]
  4. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  5. Antonio Minniti, 2006. "Multi-product Firms, R&D, and Growth," Topics in Macroeconomics, Berkeley Electronic Press, vol. 6(3), pages 1448-1448. [Downloadable!] (restricted)
    Other versions:
  6. Astrid A. Dick, 2002. "Demand estimation and consumer welfare in the banking industry," Finance and Economics Discussion Series 2002-58, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  7. Justin Johnson, 2005. "Entry-Level Products with Consumer Learning," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), pages 1434-1434. [Downloadable!] (restricted)
  8. Rika Onishi Mortimer, 1998. "Demand for Prescription Drugs: The Effects of Managed Care Pharmacy Benefits," HEW 9802002, EconWPA. [Downloadable!]
  9. Simon P. Anderson & André de Palma, 2003. "Market Performance With Multiproduct Firms," Virginia Economics Online Papers 357, University of Virginia, Department of Economics. [Downloadable!]
  10. L. Lambertini, 2000. "The Monopolist's Optimal R&D Portfolio," Working Papers 391, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
    Other versions:
  11. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. David P. Myatt & Justin P. Johnson, 2005. "Multiproduct Cournot Oligopoly," Economics Series Working Papers 145, University of Oxford, Department of Economics. [Downloadable!]
  13. repec:tcd:wpaper:tep10 is not listed on IDEAS
  14. Marina Giacomo, 2008. "GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands," Empirical Economics, Springer, vol. 34(3), pages 537-565, June. [Downloadable!] (restricted)
  15. Fershtman, C. & Gandal, N., 1996. "The effect of the Arab boycott on Israel : the automobile market," Discussion Paper 8, Tilburg University, Center for Economic Research. [Downloadable!]
  16. Chaim Fershtman & Neil Gandal, 1995. "The Effect of the Arab Boycott on Israel: The Automobile Market," International Trade 9511001, EconWPA. [Downloadable!]
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