Product Choice and Product Switching

Stephen Redding, Andrew Bernard and Peter Schott

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper develops a model of endogenous product selection within industries by firms. The model is motivated by new evidence we present on the prevalence and importance of product changing activity by U.S. manufacturers. Three-fifths of continuing firms alter their product mix within an industry every five years, and added and dropped products account for a substantial portion of firm output. In the model, firms make decisions about both industry entry and product choice. Product choice is shaped by the interaction of heterogeneous firm characteristics and diverse product attributes. Changes in market conditions within an industry result in simultaneous adjustment along a number of margins, including both entry/exit and product choice.

Keywords: Product selection; heterogeneous firms; product differentiation; sunk entry costs (search for similar items in EconPapers)
JEL-codes: D21 L11 L60 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2005-10
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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Downloads: (external link)
https://www2.census.gov/ces/wp/2005/CES-WP-05-22.pdf First version, 2005 (application/pdf)

Related works:
Working Paper: Product Choice and Product Switching (2003)
Working Paper: Product Choice and Product Switching (2003)
Working Paper: Product choice and product switching (2003)
Working Paper: Product Choice and Product Switching (2003)
Working Paper: Product Choice and Product Switching (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:05-22

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