Variety: Consumer Choice and Optimal Diversity
Consumers choose from among the varieties of two brands and an outside good using order statistics. We analytically derive demand functions conditional on their valuations of the varieties being distributed independently uniform. Based on this theory, we estimate a threeparameter empirical version of the model for the soft-drink market. These estimates are used to determine the effects of changes in the number of varieties on demand curves and consumer welfare. We use our estimates to compare the profit-maximizing number of varieties within a grocery store to the socially optimal number and find that consumer surplus and welfare would increase with more variety.
|Date of creation:||Jan 2009|
|Date of revision:|
|Contact details of provider:|| Postal: 1376 Storrs Road, U-21, Storrs, Connecticut 06269-4021|
Web page: http://www.zwickcenter.uconn.edu
More information through EDIRC
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.:
- Golan, Amos & Karp, Larry S. & Perloff, Jeffrey M., 1998.
"Estimating Coke and Pepsi's Price and Advertising Strategies,"
Competition Policy Center, Working Paper Series
qt18b1q4kr, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Golan, Amos & Karp, Larry S & Perloff, Jeffrey M, 2000. "Estimating Coke's and Pepsi's Price and Advertising Strategies," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 398-409, October.
- Golan, Amos & Karp, Larry & Perloff, Jeffrey M., 1999. "Estimating Coke and Pepsi's price and advertising strategies," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6rf8j6m4, Department of Agricultural & Resource Economics, UC Berkeley.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, December.
- Perloff, Jeffrey M & Salop, Steven, 1984.
"Equilibrium with product differentiation,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt4cq0m6s3, Department of Agricultural & Resource Economics, UC Berkeley.
- Gilbert, Richard J. & Matutes, Carmen, 1989.
"Product Line Rivalry with Brand Differentiation,"
Department of Economics, Working Paper Series
qt1nr3k6nk, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Gasmi, F & Laffont, J J & Vuong, Q, 1992.
"Econometric Analysis of Collusive Behavior in a Soft-Drink Market,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 1(2), pages 277-311, Summer.
- Gasmi, Farid & Laffont, Jean-Jacques & Vuong, Quang, 1992. "Econometric Analysis of Collusive Behavior in a Soft Drink Market," IDEI Working Papers 16, Institut d'Économie Industrielle (IDEI), Toulouse.
- Raubitschek, Ruth S, 1987. "A Model of Product Proliferation with Multiproduct Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 269-79, March.
- Aviv Nevo, 2003.
"New Products, Quality Changes, and Welfare Measures Computed from Estimated Demand Systems,"
The Review of Economics and Statistics,
MIT Press, vol. 85(2), pages 266-275, May.
- Aviv Nevo, 2001. "New Products, Quality Changes and Welfare Measures Computed From Estimated Demand Systems," NBER Working Papers 8425, National Bureau of Economic Research, Inc.
- Raymond Deneckere & Michael Rothschild, 1992. "Monopolistic Competition and Preference Diversity," Review of Economic Studies, Oxford University Press, vol. 59(2), pages 361-373.
- Michaela Draganska & Dipak C. Jain, 2005. "Product-Line Length as a Competitive Tool," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 1-28, 03.
- Tirtha Dhar & Jean-Paul Chavas & Ronald W. Cotterill & Brian W. Gould, 2005. "An Econometric Analysis of Brand-Level Strategic Pricing Between Coca-Cola Company and PepsiCo," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 905-931, December.
When requesting a correction, please mention this item's handle: RePEc:zwi:fpcrep:115. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.