Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

6-2009

Publication Source

Quantitative Marketing and Economics

Volume

7

Issue

2

Start Page

105

Last Page

146

DOI

10.1007/s11129-008-9047-7

Abstract

This paper investigates empirically the product assortment strategies of oligopolistic firms. We develop a framework that integrates product choice and price competition in a differentiated product market. The present model significantly improves upon the reduced-form profit functions typically used in the entry and location choice literature, because the variable profits that enter the product-choice decision are derived from a structural model of demand and price competition. Given the heterogeneity in consumers’ product valuations and responses to price changes, this is a critical element in the analysis of product assortment decisions. Relative to the literature on structural demand models, our results show that incorporating endogenous product choice is essential for policy simulations and may entail very different conclusions from settings where product assortment choices are held fixed.

Copyright/Permission Statement

The final publication is available at Springer via http://dx.doi.org/10.1007/s11129-008-9047-7

Keywords

product assortment decisions, multi-product firms, discrete games

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Date Posted: 27 November 2017

This document has been peer reviewed.