MARKET PERFORMANCE WITH MULTIPRODUCT FIRMS*

Simon Anderson and André de Palma ()

Journal of Industrial Economics, 2006, vol. 54, issue 1, 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.

Date: 2006
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Citations: View citations in EconPapers (22)

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https://doi.org/10.1111/j.1467-6427.2006.00277.x

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Working Paper: MARKET PERFORMANCE WITH MULTIPRODUCT FIRMS (2003)
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