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- Title
Multi-product Firms and Product Variety.
- Authors
Caminal, Ramon; Granero, Lluís M.
- Abstract
We examine the role of multi-product firms in the provision of product variety using the Chen-Riordan spokes model. In the presence of economies of scope, the equilibrium includes a small number of multi-product firms that use their product range strategically in order to affect rivals' prices. We show that under some conditions, firms drastically restrict their product range in order to relax price competition, causing a substantial underprovision of variety. However, in general, product variety under multi-product firms may be higher or lower with respect to both the first best and the equilibrium with single-product firms.
- Subjects
MULTIPRODUCT firms; ECONOMIC equilibrium; PRICES; ECONOMIC competition; ECONOMIES of scope
- Publication
Economica, 2012, Vol 79, Issue 314, p303
- ISSN
0013-0427
- Publication type
Article
- DOI
10.1111/j.1468-0335.2011.00897.x