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Market Performance With Multiproduct Firms

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Author Info
Simon P. Anderson ()
André de Palma ()

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Abstract

We revisit the fundamental issue of market provision of variety associated with Chamberlin, Spence, and Dixit and Stiglitz when firms sell several products. Both products and firms are envisaged as di?erentiated. We propose a nested demand model where consumers decide upon a firm then which variant to buy, and use it to determine the market’s biases when firms compete in product ranges and prices. The market system attracts too many firms with too few products per firm: firms restrain product ranges to relax price competition, but this exacerbates overentry. The results extend to generalized nested CES models.

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File URL: http://www.virginia.edu/economics/RePEc/vir/virpap/papers/virpap357.pdf
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Publisher Info
Paper provided by University of Virginia, Department of Economics in its series Virginia Economics Online Papers with number 357.

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Length: 46 pages
Date of creation: 22 Dec 2003
Date of revision:
Handle: RePEc:vir:virpap:357

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Web page: http://www.virginia.edu/economics/home.html

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Related research
Keywords: Multiproduct firms; excess variety; nested demand; product line competition;

Other versions of this item:

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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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. Verboven, Frank, 1996. "The nested logit model and representative consumer theory," Economics Letters, Elsevier, vol. 50(1), pages 57-63, January. [Downloadable!] (restricted)
  2. Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, vol. 57(3), pages 533-57, May. [Downloadable!] (restricted)
  3. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July. [Downloadable!] (restricted)
  4. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Blackwell Publishing, vol. 43(2), pages 217-35, June. [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. Daniel McFadden, 2001. "Economic Choices," American Economic Review, American Economic Association, vol. 91(3), pages 351-378, June. [Downloadable!] (restricted)
    Other versions:
  7. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, vol. 63(6), pages 1281-1301, November. [Downloadable!] (restricted)
    Other versions:
  8. Katz, Michael L, 1984. "Firm-Specific Differentiation and Competition among Multiproduct Firms," Journal of Business, University of Chicago Press, vol. 57(1), pages S149-66, January. [Downloadable!] (restricted)
  9. Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Blackwell Publishing, vol. 40(3), pages 261-76, September. [Downloadable!] (restricted)
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  10. Paul W. Dobson & Michael Waterson, 1996. "Product Range and Interfirm Competition," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 5(3), pages 317-341, 09. [Downloadable!] (restricted)
  11. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, March. [Downloadable!]
  12. Justin P. Johnson & David P. Myatt, 2003. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," American Economic Review, American Economic Association, vol. 93(3), pages 748-774, June. [Downloadable!]
    Other versions:
  13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
    Other versions:
  14. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 49(1), pages 3-13, January. [Downloadable!] (restricted)
  15. Feenstra, Robert C & Levinsohn, James A, 1995. "Estimating Markups and Market Conduct with Multidimensional Product Attributes," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 19-52, January. [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. Oliver Lorz & Matthias Wrede, 2009. "Trade and Variety in a Model of Endogenous Product Differentiation," MAGKS Papers on Economics 200902, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
  2. repec:bep:mactop:v:6:y:2006:i:3:p:1448-1448 is not listed on IDEAS
  3. Minniti, Antonio, 2006. "Multi-Product Firms, R&D, and Growth," MPRA Paper 2097, University Library of Munich, Germany. [Downloadable!]
  4. Caminal, Ramón, 2006. "Too Many or Too Few Varieties? The Role of Multiproduct Firms," CEPR Discussion Papers 5938, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Ramon Caminal & Lluís M. Granero, 2008. "Multi-product Firms and Product Variety," UFAE and IAE Working Papers 734.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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