Optimal Product Proliferation in Monopoly: A Dynamic Analysis
The monopolist’s incentives towards product proliferation are evaluated in an optimal control model considering three alternative regimes: profit-seeking; social planning; and a hybrid case with monopoly pricing and a regulator setting product innovation to maximise welfare. In equilibtium, the profitseeking firm supplies a socially suboptimal number of varieties to reduce cannibalisation while the social planner exploits the same effect to satisfy consumers’ love for variety and decrease the market price of all products. In terms of the Schumpeter vs Arrow debate on the relationship between market structure and innovation incentives, the results obtained in this model have a definite Arrovian flavor
|Date of creation:||Oct 2008|
|Contact details of provider:|| Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna|
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
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.:
- Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
- Majerus, David W., 1988. "Price vs. quantity competition in oligopoly supergames," Economics Letters, Elsevier, vol. 27(3), pages 293-297.
- Champsaur, Paul & Rochet, Jean-Charles, 1989.
Econometric Society, vol. 57(3), pages 533-557, May.
- CHAMPSAUR, Paul & ROCHET, Jean-Charles, "undated". "Multiproduct duopolists," CORE Discussion Papers RP 854, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Giacomo Bonanno, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 37-45.
- Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-334, June.
- James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
- Wernerfelt, Birger, 1986. "Product Line Rivalry: Note," American Economic Review, American Economic Association, vol. 76(4), pages 842-844, September.
- Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-276, September.
- Simon P. Anderston & Andre de Palma, 1991. "Multiproduct Firms: A Nested Logit Approach," Discussion Papers 973, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- MacDonald, Glenn M & Slivinski, Alan, 1987. "The Simple Analytics of Competitive Equilibrium with Multiproduct Firms," American Economic Review, American Economic Association, vol. 77(5), pages 941-953, December.
- De Fraja, Giovanni, 1994. "A General Characterization of Multiproduct Cournot Competition," Bulletin of Economic Research, Wiley Blackwell, vol. 46(2), pages 171-183, April.
- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- repec:wsi:igtrxx:v:06:y:2004:i:04:n:s0219198904000320 is not listed on IDEAS
- Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
- Roberto Cellini & Luca Lambertini, 2004. "Private And Social Incentives Towards Investment In Product Differentiation," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 493-508.
- R. Cellini & L. Lambertini, 2002. "Private and Social Incentives Towards Investment in Product Differentiation," Working Papers 431, Dipartimento Scienze Economiche, Universita' di Bologna.
- Cellini, Roberto & Lambertini, Luca, 2002. "A differential game approach to investment in product differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 51-62, November.
- Jaskold Gabszewicz, Jean & Shaked, Avner & Sutton, John & Thisse, Jacques-Francois, 1986. "Segmenting the market: The monopolist's optimal product mix," Journal of Economic Theory, Elsevier, vol. 39(2), pages 273-289, August.
- GABSZEWICZ, Jean J. & SHAKED, Avner & SUTTON, John & THISSE, Jacques-François, "undated". "Segmenting the market: the monopolist's optimal product mix," CORE Discussion Papers RP 707, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Panzar, John C., 1989. "Technological determinants of firm and industry structure," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 1, pages 3-59 Elsevier. Full references (including those not matched with items on IDEAS)