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Competition, Product Proliferation and Welfare: A Study of the U.S.\ Smartphone Market

Author

Listed:
  • Chenyu Yang

    (University of Michigan, Ann Arbor)

  • Ying Fan

    (University of Michigan)

Abstract

We develop and estimate a structural model of the U.S. smartphone market. Based on the estimates, we study (1) whether there are too few or too many products in the market from a welfare point of view; and (2) how competition affects product offerings in the market. We find that there are too few products and a reduction in competition further decreases the product offerings. These results suggest that merger policies should be stricter when we take into account the effect of merger on firms' product choices in addition to its effect on prices.

Suggested Citation

  • Chenyu Yang & Ying Fan, 2016. "Competition, Product Proliferation and Welfare: A Study of the U.S.\ Smartphone Market," 2016 Meeting Papers 758, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:758
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    References listed on IDEAS

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    1. Crawford, Gregory S., 2012. "Endogenous product choice: A progress report," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 315-320.
    2. Ying Fan, 2013. "Ownership Consolidation and Product Characteristics: A Study of the US Daily Newspaper Market," American Economic Review, American Economic Association, vol. 103(5), pages 1598-1628, August.
    3. Gregory S. Crawford & Ali Yurukoglu, 2012. "The Welfare Effects of Bundling in Multichannel Television Markets," American Economic Review, American Economic Association, vol. 102(2), pages 643-685, April.
    4. Przemysław Jeziorski, 2014. "Estimation of cost efficiencies from mergers: application to US radio," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 816-846, December.
    5. Andrew Sweeting, 2013. "Dynamic Product Positioning in Differentiated Product Markets: The Effect of Fees for Musical Performance Rights on the Commercial Radio Industry," Econometrica, Econometric Society, vol. 81(5), pages 1763-1803, September.
    6. Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2009. "Competition and price discrimination in the market for mailing lists," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 147-179, June.
    7. Michaela Draganska & Michael Mazzeo & Katja Seim, 2009. "Beyond plain vanilla: Modeling joint product assortment and pricing decisions," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 105-146, June.
    8. Gregory S. Crawford & Oleksandr Shcherbakov & Matthew Shum, 2015. "The welfare effects of endogenous quality choice in cable television markets," ECON - Working Papers 202, Department of Economics - University of Zurich.
    9. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    10. Alon Eizenberg, 2014. "Upstream Innovation and Product Variety in the U.S. Home PC Market," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1003-1045.
    11. Katja Seim, 2006. "An empirical model of firm entry with endogenous product‐type choices," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 619-640, September.
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    Cited by:

    1. Qizhong YANG & Keiichiro HONDA & Tsunehiro OTSUKI, 2018. "Structure Demand Estimation of the Response to Food Safety Regulations in the Japanese Poultry Market," OSIPP Discussion Paper 18E003, Osaka School of International Public Policy, Osaka University.
    2. Chenyu Yang, 2017. "Could Vertical Integration Increase Innovation?," 2017 Meeting Papers 908, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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