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Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing

Author

Listed:
  • Charlotte R. Ren

    () (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Ye Hu

    () (Bauer College of Business, University of Houston, Houston, Texas 77204)

  • Yu (Jeffrey) Hu

    () (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Jerry Hausman

    () (Department of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

Abstract

Product variety is an important strategic tool that firms can use to attract customers and respond to competition. This study focuses on the retail industry and investigates how stores manage their product variety, contingent on the presence of competition and their actual distance from rivals. Using a unique data set that contains all Best Buy and Circuit City stores in the United States, the authors find that a store's product variety (i.e., number of stock-keeping units) increases if a rival store exists in its market but, in the presence of such competition, decreases when the rival store is collocated (within one mile of the focal store). Moreover, collocated rival stores tend to differentiate themselves by overlapping less in product range than do noncollocated rivals. This smaller and more differentiated product variety may be because of coordinated interactions between collocated stores. In summary, this paper presents evidence of both coordination and competition in retailers' use of product variety. This paper was accepted by Bruno Cassiman, business strategy.

Suggested Citation

  • Charlotte R. Ren & Ye Hu & Yu (Jeffrey) Hu & Jerry Hausman, 2011. "Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing," Management Science, INFORMS, vol. 57(6), pages 1009-1024, June.
  • Handle: RePEc:inm:ormnsc:v:57:y:2011:i:6:p:1009-1024
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    File URL: http://dx.doi.org/10.1287/mnsc.1110.1327
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Elena Argentesi & Paolo Buccirossi & Roberto Cervone & Tomaso Duso & Alessia Marrazzo, 2018. "Price or Variety? An Evaluation of Mergers Effects in Grocery Retailing," Discussion Papers of DIW Berlin 1734, DIW Berlin, German Institute for Economic Research.
    2. Jaideep Anand & Louis Mulotte & Charlotte R. Ren, 2016. "Does experience imply learning?," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1395-1412, July.
    3. 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 Group Munich.
    4. Wieland, Thomas, 2014. "Räumliches Einkaufsverhalten und Standortpolitik im Einzelhandel unter Berücksichtigung von Agglomerationseffekten: Theoretische Erklärungsansätze, modellanalytische Zugänge und eine empirisch-ökonome," MPRA Paper 77163, University Library of Munich, Germany.
    5. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Juan Alcácer & Minyuan Zhao, 2016. "Zooming in: A practical manual for identifying geographic clusters," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 10-21, January.
    6. repec:eee:ejores:v:265:y:2018:i:2:p:399-422 is not listed on IDEAS
    7. Erik Brynjolfsson & Yu (Jeffrey) Hu & Duncan Simester, 2011. "Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales," Management Science, INFORMS, vol. 57(8), pages 1373-1386, August.
    8. Victor Manuel Bennett & Lamar Pierce & Jason A. Snyder & Michael W. Toffel, 2012. "Competition and Illicit Quality," Harvard Business School Working Papers 12-071, Harvard Business School, revised May 2012.

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