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Title: Market Performance with Multiproduct Firms Author(s): Simon P. Anderson and Andre DÉ Palma Volume: 54 Issue: 1 Pages: 95-124 Abstract: We revisit the fundamental issue of market provision of variety associated with Chamberlin, Spence, and Dixit-Stiglitz when firms sell multiple products. Both products and firms are (horizontally) differentiated. We propose a general nested demand framework where consumers first decide upon a firm then which variant to buy and how much (the nested CES is a special case). We use it to determine the market’s biases when firms compete in product ranges and prices. The market system attracts too many firms with too few products per firm: firms restrain product ranges to relax price competition, but this exacerbates over-entry.
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Last modified 04/04/2006 © Copyright 2006 The Journal of Industrial Economics, Ltd. |