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Dynamic product diversity

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  • Ramon Caminal

Abstract

The goal of this paper is to study the frequency of new product introductions in monopoly markets where demand is subject to transitory saturation. We focus on those types of goods for which consumers purchase at most one unit of each variety, but repeat purchases in the same product category. The model considers infinitely-lived, forward-looking consumers and firms. We show that the share of potential surplus that a monopolist is able to appropriate increases with the frequency of introduction of new products and the intensity of transitory saturation. If the latter is sufficiently strong then the rate of introduction of new products is higher than socially desirable (excessive dynamic product diversity.)

Suggested Citation

  • Ramon Caminal, 2011. "Dynamic product diversity," UFAE and IAE Working Papers 891.11, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:891.11
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    Cited by:

    1. Jiancai Pi & Xiangyu Huang, 2021. "Product Variety and Wage Inequality," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 135-151, May.
    2. Caminal, Ramon, 2019. "The dynamic provision of product diversity under duopoly," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 248-276.

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    More about this item

    Keywords

    transitory saturation; product diversity; repeat purchases; demand cycles;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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