Multiproduct Pricing in Oligopoly

Shelegia, Sandro

doi:10.2139/ssrn.1266161

Cited by 7 publications

(7 citation statements)

References 7 publications

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“…Lal and Matutes (1994) show that multiproduct search can lead to loss-leader pricing when some products are advertised. McAfee (1995) and Shelegia (2012) examine when and how multiproduct …rms correlate their prices across products when consumers are heterogeneously informed. 8 Zhou (2014) investigates how multiproduct search generates a joint search e¤ect, which creates complementarity between physically independent products such that multiproduct …rms have a higher incentive to reduce their prices than single-product …rms.…”

Section: Introductionmentioning

confidence: 99%

Consumer Search and Retail Market Structure

Rhodes

Zhou

2019

Management Science

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A puzzling feature of many retail markets is the coexistence of large multiproduct …rms and smaller …rms with narrow product ranges. This paper provides a possible explanation for this puzzle, by studying how consumer search frictions in ‡uence the structure of retail markets. In our model single-product …rms which supply di¤erent products can merge to form a multiproduct …rm. Consumers wish to buy multiple products, and due to search frictions value the one-stop shopping convenience associated with a multiproduct …rm. We …nd that when search frictions are relatively large all …rms are multiproduct in equilibrium. However when search frictions are smaller the equilibrium market structure is asymmetric, with di¤erent retail formats coexisting. This allows …rms to better segment the market, and as such typically leads to the weakest price competition. When search frictions are low this asymmetric market structure is also the worst for consumers. Moreover due to the endogeneity of market structure, a reduction in the search friction can increase market prices and harm consumers.

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Section: Introductionmentioning

confidence: 99%

Consumer Search and Retail Market Structure

Rhodes

Zhou

2019

Management Science

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“…For example, when there is severe competition among firms and the entry barrier is low, any monopoly or oligopoly cannot be sustained. On the other hand, if an entry barrier is formed based on some complex factors preventing new firms from participating in the market, then the existing monopoly or oligopoly can continue (Chakrabarty, 2009; Gutierrez and He, 2011; Kim et al , 2011; Shelegia, 2011).…”

Section: Introductionmentioning

confidence: 99%

Entry barrier's difference between ICT and non‐ICT industries

Yang

Lee²,

Lee³

2013

Industrial Management &Amp; Data Systems

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PurposeGiven the increasingly saturated information and communication technology (ICT) market and the intensification of competition among ICT firms, there is a need for a better understanding of entry barriers in the ICT market. The purpose of this paper is to examine the overall characteristics of these entry barriers and identify firms' strategies for achieving market dominance.Design/methodology/approachThe authors examined the overall characteristics of these entry barriers and identified firms' strategies for achieving market dominance by tracking the actual patterns of firms' ICT market entry based on the Bass diffusion model.FindingsThe results indicate that the saturation of the ICT market reduced entry barriers, which strengthened the imitation effect. In addition, entry barriers were lower for ICT firms than for non‐ICT ones. Furthermore, entry barriers were higher for the manufacturing sector than for the service sector, indicating that the innovation effect was stronger for the manufacturing sector than for the service sector, whereas the opposite was true for the imitation effect.Originality/valueThese results suggest that those firms that are planning to enter or are already in the ICT market should develop better strategies for gaining a competitive advantage.

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“…The role of search costs in multiproduct settings was also studied by Rhodes (), Shelegia (), and Zhou (). In those articles, too, the search costs are not under the control of the firms in question.…”

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confidence: 99%

Consumer obfuscation by a multiproduct firm

Petrikaitė

2018

The RAND J of Economics

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also analyzes obfuscation and the price choices of a multiproduct monopolist with horizontally differentiated products. Unlike the present article, he places fewer restrictions on the distributions of match values and focuses on markets with more than two products and observable prices. For these reasons, some of his results and welfare findings differ from the present article, including showing that obfuscation might improve welfare.By obfuscating some of its products, the monopolist controls the order in which its goods are sampled. In this sense, the present article is related to the literature on ordered searching. Arbatskaya (2007) shows that when consumers shop for homogeneous products, equilibrium prices must fall as a consumer proceeds to search for lower prices. Zhou (2011) demonstrates that when consumers shop for differentiated products, equilibrium prices increase instead. Armstrong, Vickers, and Zhou (2009) explore the role of prominence in search markets and show that a prominent product is sold at a lower price relative to nonprominent products. The main difference between those articles and the present one is that this study focuses on the role of search frictions among the products provided by a single firm. Zhou (2009) also observes that a multiproduct monopolist earns higher profits if one of its products is prominent. My monopoly analysis extends his result by allowing the monopolist to choose the degree of obfuscation, and by treating differences in product quality and design. 3 The decision of a firm to obfuscate its products is somewhat related to its decision to advertise its products. Therefore, in this sense, the present article is related to the work of Caminal (1996), Anderson and Renault (2006), and Wang (2017). In all three models, the decision to advertise affects consumers' decisions on whether to pay a costly visit to a firm, and the firm chooses the advertising option that leads to the highest possible consumer traffic. The major difference between those articles and the present one is that in those articles, a single-product advertising monopolist often earns less if fewer consumers search, whereas in the present article, the multiproduct monopolist gains from consumers who decide not to search much, in that they buy products that are more expensive, though less obfuscated. Janssen and Non (2009) show that there may be an equilibrium in a duopoly model with homogeneous products, in which advertising firms charge higher prices. Their result stems from the fact that consumers differ in their willingness to pay that is positively correlated with their search costs. In contrast in the present article, there is no search cost differentiation across consumers.By the fact that the mean valuation of a product by consumers who acquire the good decreases in the search order, my results resemble the findings of models with an intertemporal pricediscriminating monopolist (see, e.g., Coase, 1972;Stokey, 1979Stokey, , 1981Bulow, 1982). However, unlike with that monopolist, its multiproduct ...

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Multiproduct Pricing in Oligopoly

Cited by 7 publications

References 7 publications

Consumer Search and Retail Market Structure

Consumer Search and Retail Market Structure

Entry barrier's difference between ICT and non‐ICT industries

Consumer obfuscation by a multiproduct firm

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