Selecting Valuation Distributions: Non-Price Decisions of Multi-Product Firms

Armin Schmutzler and Stefanie Bossard

No 16655, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyzes decisions of multi-product firms regarding product selection, innovation and advertising as choices of consumer valuation distributions. We show that a profit-maximizing monopolist chooses these distributions so as to maximize the dispersion of the valuation differences between goods across consumers. By contrast, she chooses the willingness-to-pay to be maximally or minimally dispersed, depending on the set of available distributions. In our benchmark model with uniform valuation differences, prices are increasing in valuation difference heterogeneity, but in more general settings this is not necessarily true. Moreover, the relation between willingness-to-pay heterogeneity and prices may well be non-monotone. Over wide parameter ranges, the firm's choice of valuation distribution does not maximize net consumer surplus. This problem is exacerbated when the firm has access to strategies that distort valuation heterogeneity or willingness-to-pay heterogeneity.

Date: 2021-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16655 (application/pdf)

Related works:
Working Paper: Selecting valuation distributions: non-price decisions of multi-product firms (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16655

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16655

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().