Retail structure and product variety
We examine the impact of horizontal and vertical market structure on innovation and product variety. We consider a market for a homogeneous good where it is possible to innovate to launch a new substitute product. The cost of launching the new product is fixed and spread between the manufacturing and the retail industries. We show that a vertically intergrated firm offers a wider variety of products than a chain of monopolies. If the cost of launching a new product is equally shared among the vertical structure or mostly supported by upstream firms, retail competition partially restores the incentives to innovate of the vertical structure. Yet when the cost of launching a new product is mostly supported by the retail sector, downstream competition even leads to more innovation than vertical integration.
|Date of creation:||2006|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00243032|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Howard Marvel & James Peck, 2000. "Vertical Control, Retail Inventories & Product Variety," Working Papers 00-09, Ohio State University, Department of Economics.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, May.
- Rey, Patrick & Tirole, Jean, 1986. "The Logic of Vertical Restraints," American Economic Review, American Economic Association, vol. 76(5), pages 921-939, December.
- Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-265, March.
- Brocas, Isabelle, 2003. "Vertical integration and incentives to innovate," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 457-488, April.
- Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347-347.
- Martin A. Lariviere & V. Padmanabhan, 1997. "Slotting Allowances and New Product Introductions," Marketing Science, INFORMS, vol. 16(2), pages 112-128.
- Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.