IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v40y1992i3p261-76.html
   My bibliography  Save this article

Multiproduct Firms: A Nested Logit Approach

Author

Listed:
  • Anderson, Simon P
  • de Palma, Andre

Abstract

This paper proves the existence of a symmetric equilibrium with multiproduct firms using a nested logit model of demand. The demand model is parameterized by two variables that characterize different dimensions of preference for variety. These reflect intragroup heterogeneity and intergroup heterogeneity, a group (or nest) being the set of products produced by a firm. There are then two dimensions to market performance: the total number of firms and the range of products produced per firm. It is shown that the market equilibrium involves an excessive number of firms, but each firm provides too few products. Copyright 1992 by Blackwell Publishing Ltd.

Suggested Citation

  • Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-276, September.
    • Handle: RePEc:bla:jindec:v:40:y:1992:i:3:p:261-76
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1821%28199209%2940%3A3%3C261%3AMFANLA%3E2.0.CO%3B2-X&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-334, June.
    2. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    3. Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-442, June.
    4. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    5. Daniel McFadden, 1986. "The Choice Theory Approach to Market Research," Marketing Science, INFORMS, vol. 5(4), pages 275-297.
    6. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 107-120.
    7. S. Chan Choi & Wayne S. Desarbo & Patrick T. Harker, 1990. "Product Positioning Under Price Competition," Management Science, INFORMS, vol. 36(2), pages 175-199, February.
    8. Anderson, Simon P & De Palma, Andre, 1992. "The Logit as a Model of Product Differentiation," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 51-67, January.
    9. Kenneth E. Train & Daniel L. McFadden & Moshe Ben-Akiva, 1987. "The Demand for Local Telephone Service: A Fully Discrete Model of Residential Calling Patterns and Service Choices," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 109-123, Spring.
    10. Raymond Deneckere & Michael Rothschild, 1992. "Monopolistic Competition and Preference Diversity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(2), pages 361-373.
    11. Hotaka Katahira, 1990. "Perceptual Mapping Using Ordered Logit Analysis," Marketing Science, INFORMS, vol. 9(1), pages 1-17.
    12. Besanko, David & Perry, Martin K & Spady, Richard H, 1990. "The Logit Model of Monopolistic Competition: Brand Diversity," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 397-415, June.
    13. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simon P. Anderson & Andre de Palma, 1989. "The Logit as a Model of Product Differentiation: Further Results and Extensions," Discussion Papers 913, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Anderson, Simon P. & de Palma, Andre, 1999. "Reverse discrete choice models," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 745-764, November.
    3. Anderson, Simon P. & de Palma, Andre, 2000. "From local to global competition," European Economic Review, Elsevier, vol. 44(3), pages 423-448, March.
    4. Horrace, William C. & Huang, Rui & Perloff, Jeffrey M., 2016. "Effects of increased variety on demand, pricing, and welfare," Research in Economics, Elsevier, vol. 70(4), pages 569-587.
    5. Margaret Aksoy-Pierson & Gad Allon & Awi Federgruen, 2013. "Price Competition Under Mixed Multinomial Logit Demand Functions," Management Science, INFORMS, vol. 59(8), pages 1817-1835, August.
    6. Horrace, William & Huang, Rui & Perloff, Jeffrey, 2009. "Variety: Consumer Choice and Optimal Diversity," Research Reports 149942, University of Connecticut, Food Marketing Policy Center.
    7. Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.
    8. Ulrich Doraszelski & Michaela Draganska, 2006. "Market Segmentation Strategies Of Multiproduct Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 125-149, March.
    9. Christou, C. & Vettas, N., 2008. "On informative advertising and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 92-112, January.
    10. W. Ross Morrow & Steven J. Skerlos, 2011. "Fixed-Point Approaches to Computing Bertrand-Nash Equilibrium Prices Under Mixed-Logit Demand," Operations Research, INFORMS, vol. 59(2), pages 328-345, April.
    11. Jean-Pierre H. Dubé, 2018. "Microeconometric Models of Consumer Demand," NBER Working Papers 25215, National Bureau of Economic Research, Inc.
    12. Torshizi Mohammad & Fulton Murray E. & Gray Richard S., 2018. "Non-Linear Demand in a Linear Town," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(2), pages 1-12, November.
    13. Andre dePalma & Karim Kilani, 2000. "The Optimal of Provision of Products with Income Effects," Econometric Society World Congress 2000 Contributed Papers 1299, Econometric Society.
    14. Allen, Beth & Thisse, Jacques-Francois, 1992. "Price Equilibria in Pure Strategies for Homogeneous Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 63-81, Spring.
    15. Light, Bar & Weintraub, Gabriel, 2018. "Mean Field Equilibrium: Uniqueness, Existence, and Comparative Statics," Research Papers 3731, Stanford University, Graduate School of Business.
    16. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    17. Zhou, Jidong, 2021. "Mixed bundling in oligopoly markets," Journal of Economic Theory, Elsevier, vol. 194(C).
    18. Blanchard, Pierre & Gaigné, Carl & Mathieu, Claude, 2012. "Trade costs and international strategy of firms: The role of endogenous product differentiation," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1023-1036.
    19. Rhodes, Andrew & Zhou, Jidong, 2022. "Personalized Pricing and Competition," MPRA Paper 112988, University Library of Munich, Germany.
    20. Takatoshi Tabuchi, 2009. "Hotelling's Spatial Competition Reconsidered," CIRJE F-Series CIRJE-F-674, CIRJE, Faculty of Economics, University of Tokyo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:40:y:1992:i:3:p:261-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.