Product Variety and Competitive Pricing in Consumer Goods Markets

Topics:
Competitive Pricing
Tags:
Competitive Pricing,
Manufacturer,
Manufacturing,
University Of Munich
Source:
University of Munich

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Overview: Manufacturer prices and the retail price are functions of the degree of variety offered by manufacturers. Given different choices in variety, equilibrium prices are calculated. This paper shows that manufacturers can raise prices and mark-ups if they increase variety and if competitors do not follow. In a more realistic scenario where manufacturers respond to each other and follow competitors, the effect of variety through increased prices and higher mark-ups of the manufacturers almost diminishes to zero.

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Format: PDF | Size: 206KB | Date: Aug 2004 | Pages: 19

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