Dynamic Product Diversity

Ramon Caminal

No 8990, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The goal of this paper is to study the frequency of new product introductions in monopoly markets where demand is subject to transitory saturation. We focus on those types of goods for which consumers purchase at most one unit of each variety, but repeat purchases in the same product category. The model considers infinitely-lived, forward-looking consumers and firms. We show that the share of potential surplus that a monopolist is able to appropriate increases with the frequency of introduction of new products and the intensity of transitory saturation. If the latter is sufficiently strong then the rate of introduction of new products is higher than socially desirable (excessive dynamic product diversity).

Keywords: Demand cycles; Product diversity; Repeat purchases; Transitory saturation (search for similar items in EconPapers)
JEL-codes: L12 L13 (search for similar items in EconPapers)
Date: 2012-05
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Related works:
Journal Article: Dynamic Product Diversity (2016)
Working Paper: Dynamic product diversity (2011)
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