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Multiproduct Firms and Market Structure

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  • Avner Shaked
  • John Sutton

Abstract

Models of (horizontal) product differentiation generally admit many equilibria. These include concentrated equilibria, in which few firms each offer many products, and fragmented equilibria, in which many firms each offer one product. Since these outcomes depend in a delicate way on features of the models that are hard to identify or proxy empirically, these models may seem empirically empty in regard to predictions about industrial structure. This article proposes a simple and natural reparameterization of such models in terms of empirically observable market characteristics, thereby generating testable predictions about the relationship between market size and market structure (concentration).

Suggested Citation

  • Avner Shaked & John Sutton, 1990. "Multiproduct Firms and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 45-62, Spring.
  • Handle: RePEc:rje:randje:v:21:y:1990:i:spring:p:45-62
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