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The provision of convenience and variety by the market

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  • Bart J. Bronnenberg

Abstract

type="main"> Consumers commonly face purchasing costs, for example, travel or wait time, that are fixed to quantity but increase with variety. This article investigates the impact of such costs on the demand and supply of variety. Purchasing costs limit demand for variety like prices limit demand for quantity. When demand for variety is low, manufacturers generally invest substantially in lowering purchasing costs, to attract consumers. In the monopolistic competition free-entry equilibrium, providing convenience increases the demand for variety, but its costs reduce supply. The desirability of nonprice competition in convenience and its implications for variety and market concentration are discussed.

Suggested Citation

  • Bart J. Bronnenberg, 2015. "The provision of convenience and variety by the market," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 480-498, September.
    • Handle: RePEc:bla:randje:v:46:y:2015:i:3:p:480-498
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    1. Elena Argentesi & Paolo Buccirossi & Roberto Cervone & Tomaso Duso & Alessia Marrazzo, 2018. "Price or Variety? An Evaluation of Mergers Effects in Grocery Retailing," CESifo Working Paper Series 7035, CESifo.
    2. Heski Bar-Isaac & Guillermo Caruana & Vicente Cuñat, 2023. "Targeted Product Design," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 157-186, May.
    3. Kristina Brecko, 2023. "New Features Free of Charge? Intertemporal Product Versions and Pricing in the Software Market," Marketing Science, INFORMS, vol. 42(1), pages 61-86, January.
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    5. Heski Bar-Isaac & Guillermo Caruana & Vicente Cuñat, 2023. "Targeted Product Design," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 157-186, May.
    6. Reto Foellmi & Christian Hepenstrick & Zweimüller Josef, 2018. "International Arbitrage and the Extensive Margin of Trade between Rich and Poor Countries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(1), pages 475-510.
    7. Benedict G. C. Dellaert, 2019. "The consumer production journey: marketing to consumers as co-producers in the sharing economy," Journal of the Academy of Marketing Science, Springer, vol. 47(2), pages 238-254, March.
    8. Jean-Pierre Dubé & Ali Hortaçsu & Joonhwi Joo, 2021. "Random-Coefficients Logit Demand Estimation with Zero-Valued Market Shares," Marketing Science, INFORMS, vol. 40(4), pages 637-660, July.
    9. Xu, Yan, 2017. "Essays on preference formation and home production," Other publications TiSEM b028fd7e-53ba-4ff6-97eb-4, Tilburg University, School of Economics and Management.
    10. Maican, Florin & Orth, Matilda, 2021. "Entry Regulations and Product Variety in Retail," CEPR Discussion Papers 15992, C.E.P.R. Discussion Papers.
    11. Nicholas Li, 2021. "An Engel Curve for Variety," The Review of Economics and Statistics, MIT Press, vol. 103(1), pages 72-87, March.
    12. Argentesi, Elena & Buccirossi, Paolo & Cervone, Roberto & Duso, Tomaso & Marrazzo, Alessia, 2021. "The effect of mergers on variety in grocery retailing," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    13. Hannes Datta & George Knox & Bart J. Bronnenberg, 2018. "Changing Their Tune: How Consumers’ Adoption of Online Streaming Affects Music Consumption and Discovery," Marketing Science, INFORMS, vol. 37(1), pages 5-21, January.
    14. Joonhwi Joo & Ali Hortacsu, 2016. "Semiparametric estimation of CES demand system with observed and unobserved product characteristics," 2016 Meeting Papers 36, Society for Economic Dynamics.
    15. Maican, Florin & Orth, Matilda, 2021. "Determinants of economies of scope in retail," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    16. Ho, Shuay-Tsyr & Rickard, Bradley J., 2021. "Regulation and purchase diversity: Empirical evidence from the U.S. alcohol market," International Review of Law and Economics, Elsevier, vol. 68(C).
    17. Liu, Qihong & Xie, Xin, 2024. "Product line competition: An empirical analysis of the Chinese airline industry," China Economic Review, Elsevier, vol. 83(C).
    18. Johannes Loh, 2022. "Selection, Consumption, and New Music Exploration in an Online Social Network: A Dyadic Approach," CESifo Working Paper Series 10120, CESifo.
    19. Lu, Steven Qiang & Pauwels, Koen, 2024. "More transactions but a lower average transaction value: How mobile payment apps influence consumer purchases through time-savings," International Journal of Research in Marketing, Elsevier, vol. 41(4), pages 761-776.
    20. Bronnenberg, Bart, 2018. "Innovation and Distribution: A General Equilibrium Model of Manufacturing and Retailing," CEPR Discussion Papers 13058, C.E.P.R. Discussion Papers.

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