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Multi-product firms and product variety

Ramon Caminal () and Lluís M. Granero

No 338, Working Papers from Barcelona Graduate School of Economics

Abstract: The goal of this paper is to study the role of multi-product firms in the market provision of product variety. The analysis is conducted using the spokes model of non-localized competition proposed by Chen and Riordan (2007). Firstly, we show that multi-product firms are at a competitive disadvantage vis-a-vis single-product firms and can only emerge if economies of scope are sufficiently strong. Secondly, under duopoly product variety may be higher or lower with respect to both the first best and the monopolistically competitive equilibrium. However, within a relevant range of parameter values duopolists drastically restrict their product range in order to relax price competition, and as a result product variety is far below the efficient level.

Keywords: product variety; multiproduct firms; monopolistic competition; spatial models (search for similar items in EconPapers)
JEL-codes: D43 L12 L13 (search for similar items in EconPapers)
Date: 2008-03
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https://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/338.pdf (application/pdf)

Related works:
Journal Article: Multi‐product Firms and Product Variety (2012) Downloads
Working Paper: Multi-product Firms and Product Variety (2008) Downloads
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