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Product Line Design

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  • Anderson, Simon
  • Celik, Levent

Abstract

We characterize the product line choice and pricing of a monopolist as the upper envelope of net marginal revenue curves to the individual product demand functions. The equilibrium product varieties to include in a product line are those yielding the highest upper envelope. In a central case (corresponding to a generalized vertical differentiation framework), the equilibrium range of varieties is exactly the same as the first-best socially optimal range. These upper envelope and first-best optimal range findings extend to a symmetric Cournot oligopoly as well.

Suggested Citation

  • Anderson, Simon & Celik, Levent, 2014. "Product Line Design," CEPR Discussion Papers 10324, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10324
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Justin P. Johnson & David P. Myatt, 2018. "The determinants of product lines," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 541-573, September.
    2. Carlos Segura-Rodriguez, 2019. "Selling Data," PIER Working Paper Archive 19-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Justin P. Johnson & Andrew Rhodes, 2021. "Multiproduct mergers and quality competition," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 633-661, September.
    4. Wei Qi & Xinggang Luo & Xuwang Liu & Yang Yu & Zhongliang Zhang, 2019. "Product Line Pricing under Marginal Moment Model with Network Effect," Complexity, Hindawi, vol. 2019, pages 1-13, February.
    5. Zijun (June) Shi & Kaifu Zhang & Kannan Srinivasan, 2019. "Freemium as an Optimal Strategy for Market Dominant Firms," Marketing Science, INFORMS, vol. 38(1), pages 150-169, January.
    6. Johnson, Justin P. & Myatt, David P., 2015. "The properties of product line prices," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 182-188.
    7. Anderson, Simon P. & Celik, Levent, 2020. "Opaque selling," Information Economics and Policy, Elsevier, vol. 52(C).
    8. Winston W. Chang & Tai-Liang Chen, 2018. "A Pedagogical Note on Multitier Pricing Scheme," The American Economist, Sage Publications, vol. 63(2), pages 228-244, October.
    9. Anderson, Simon P. & Celik, Levent, 2015. "Product line design," Journal of Economic Theory, Elsevier, vol. 157(C), pages 517-526.
    10. Skreta, Vasiliki & Doval, Laura, 2021. "Purchase history and product personalization," CEPR Discussion Papers 15969, C.E.P.R. Discussion Papers.
    11. Steven M. Shugan & Jihwan Moon & JQiaoni Shi & Nanda S. Kumar, 2017. "Product Line Bundling: Why Airlines Bundle High-End While Hotels Bundle Low-End," Marketing Science, INFORMS, vol. 36(1), pages 124-139, January.
    12. Ji, Xiang & Wu, Jie & Liang, Liang & Zhu, Qingyuan, 2018. "The impacts of public sustainability concerns on length of product line," European Journal of Operational Research, Elsevier, vol. 269(1), pages 16-23.

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    More about this item

    Keywords

    Product line design; Product differentiation; Second-degree price discrimination; Product line pricing; Cournot multi-product competition;
    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
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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