Optimum Product Diversity and the Incentives for Entry in Natural Oligopolies

Larry Jones

The Quarterly Journal of Economics, 1987, vol. 102, issue 3, 595-613

Abstract: This paper concerns the classification of biases in the set of produced varieties in a monopolistically competitive equilibrium in the natural oligopoly setting. That is, we analyze the relationship between the set of produced goods in equilibrium when fixed costs are small and the set of produced goods by a social planner when fixed costs equal zero. It is shown that if all of the goods are substitutes, there are never too few varieties, and there may be too many. Conversely, if the goods are all complementary, there are never too many, and there may be too few.

Date: 1987
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