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

Author

Listed:
  • Ying Fan

    (Department of Economics, University of Michigan, 611 Tappan Street, Ann Arbor, MI 48109)

  • Chenyu Yang

    (Department of Economics, University of Michigan, 611 Tappan Street, Ann Arbor, MI 48109)

Abstract

We consider a structural model of demand and supply where firms endogenously offer vertically differentiated products and exercise second-degree price discrimination. We apply this model to the smartphone industry and quantify the welfare effects of price discrimination and competition. We use counterfactual simulations to assess how the welfare changes when each firm only offers its highest-quality product. We also study the market outcomes such as price, product variety and welfare if later entrants in the market entered earlier.

Suggested Citation

  • Ying Fan & Chenyu Yang, 2014. "Competition, Product Proliferation and Welfare: A Study of the U.S. Smartphone Market," Working Papers 14-14, NET Institute.
    • Handle: RePEc:net:wpaper:1414
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    endogenous product choice; second-degree price discrimination; smartphone industry;
    All these keywords.

    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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